If there’s anything businesses have come to learn from the COVID-19 pandemic, it’s that anything can happen – at any time. Being prepared for the unknown is the best way to manage these situations. If you’re serious about success in 2021, we’ve got some great tips to get you started on a budget that you can actually read and follow along with comfortably.
Managing money is a key part to business success. Understanding income, earning potential and where money is being spent vs. where it would be better allocated is no easy task. Here are 3 things you can start doing now, at the beginning of the year to be set up for financial success in 2021.
Perform a Thorough Audit
Before you can set a budget you need to understand what’s happening with your business’s finances in a full spectrum view. That means tallying up all the money you bring in including the sources for that income on a month to month breakdown. Of course not all income is profit. You also have expenses so to get the full picture you need to also deduct the items and services you’re spending money on to run the business. Both fixed and variable expenses will need to be considered and factored in if you want the most accurate budgeting plan. Armed with this holistic view of your businesses finances you can make decisions about how and where to spend.
Locate Areas for Improvement
Depending on the findings of your audit for the whole business profit and losses, you may need to figure out how to get out of the red, or how you can cut down on losses and be less wasteful with resources. The next step when preparing to make a budget that works for you is to look at those areas where changes can be made to improve the businesses financial health. This may mean using income to invest in new technologies to drive the business forward or cutting out expenses that are not worth the ROI they are producing.
Set Goals and Align Your Budget
After you have a good grasp on your business finances and have made necessary changes to optimize earning potential, it’s important to set forward thinking goals for the company. If you have a vision in place for the future of the business, chances are that will take a certain level of new income and business to achieve. By incorporating your future goals into your current budget, you can work on allocating necessary funds to bring that goal closer to fruition.
Need help with your small businesses finances? DoAAR provides highly-customizable bookkeeping, controller, or CFO services that handle the numbers for you so you can focus on what’s really important – growing your business!