Start your business off on the right foot in the New Year. Sounds great right? One way to do this is to create a new budget for the new year and the 12 months to follow. This will require you to go over the previous years budget. Analyze it and if you aren’t sure where your strengths and weaknesses were, sit down with your accountant to discuss it. From that information, you can go ahead and create a realistic budget for the new year. Budgeting business expenses can be a good way to accommodate the ebb and flow that takes place in most businesses through the year. Here are 5 Reasons Creating A Budget for The New Year Is A Good Thing:
- Do Not Procrastinate —Procrastination is opportunities assassin. Before the year is over, review your books and budget. How did that work for you? Analyze it and don’t hesitate to develop a new budget for the next twelve months with the business highs and lows in mind. Create a strategy and a plan for how you will prepare for the slack times when revenues are good. Your strategy will help you stay on guard.
- Stick to the plan: A budget is telling your money where to go instead of wondering where it went. If budgeting for future expenses is an important first step and creating a plan is the second, you will need to stick to the plan for it to be successful. Consider how deviating from your plan over the previous year effected your business, how did it cause issues for you?
- Establish benchmarks and goals: Poor cash flow management is one of the biggest causes of small business failure, so establishing practices and strategies for properly managing your cash flow should be a priority. Make sure you’re on top of your cash flow metric and consult with your accountant if you’re not sure of the best approach to take.
- Pay Attention to Your Accounts Receivable: If you bill your customers by invoice and offer them 30 days to pay their bill, it doesn’t take very long for a slow-paying customer to eat up all the profit you may have had. To speed things up, you might offer your customers an additional discount to pay today or have a credit-card on file you can charge against at the end of the month. The goal is to avoid the inevitable cash flow challenges associated with slow-paying customers. The quicker you have access to that cash flow, the easier it is to manage.
- Start saving: Save money and money will save you. Setting aside a little cash for a rainy day doesn’t just apply to your household budget. There are a lot of unexpected business expenses that could be addressed with some money in the bank. A good goal to shoot for is three to six months of operating capital, but anything is better than nothing.
As we start the new year, there isn’t a better time to look at how you did over the previous year and project a budget forward, based on last years results.
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