Wednesday 24th March will see the Chancellor, Alistair Darling, give what could be his last budget. Many are saying how the budget will purely be used as an election tool and is likely to be quite a waste of time. However for a business they should consider reviewing their own budgets and make sure they are set appropriately.
Budgets are an important tool for anyone in business and at least an annual review should be considered. Many businesses approach their accounting year end at this time of year so it is an ideal time to consider how your business is doing and what you wish it to achieve in the future.
Here are a few tips to consider when reviewing your budgets for the year:-
- Are you producing management accounts on a regular basis, if not, what financial information can you easily extract from your accounting system that would help you monitor the business.
- Business forecasts and cash flow projections should be prepared for a minimum of twelve months giving you something to monitor performance against;
- You should ensure budgets are realistic in the current climate,
- Are there any costs that can be trimmed back? Do you know which of your costs are fixed and which are variable, in reality in the short term most costs are fixed, if you need to go through a cost cutting exercise you need to know which costs can be varied and when.
- Is the cash flow behaving as expected? Are you likely to need further banking facilities at some point in the future?
- If you are selling a product, do you know what your break even level of sales is?, it is important to know at what point the business is generating a profit, following the recession with pressure on prices the break even point can be higher than you realise, you need to be aware of this.
- If you are selling a service, do you know how many of hours of time you are invoicing out a month, you may feel busy but is it resulting in billable income.
Reviewing your businesses budget can be a valuable exercise it will focus your attention to how your business is doing and help you to keep control of costs also giving you a target to achieve for the future.
Biggleswade Chronicle - 19 March 2010