It is never too early to start planning. Especially finances! Starting your budgeting process 3 – 4 months ahead of the new financial year allows you time to gather information, identify short- and long-term goals, process numerical data, make projections, get feedback or approvals, and finalise your plan on time.
Here are 5 questions to look at when planning:
What are your main strategic goals?
Forecasting will help you predict your company’s financial future, and more importantly, understand the impact of your business decisions before you implement them. However, to be able to accurately forecast your business’s financial future, you need to be clear on the overall goals of the company, if not, your forecast would only consist of random assumptions detached from the main objectives of your company.
What are the key assumptions you are making?
In order to make good assumptions, it is important to understand market trends, and involve appropriate team members that have a detailed understanding of operations and sales.
What are the drivers for growth?
Look at the strengths and weaknesses of your business. Aim to protect resources that drive growth, reuse or offload resources that are not contributing to business success, and bring in-house any resources you need but currently lack.
Will you have the required cash flow?
By developing cash flow projections for several months in advance, you can estimate when the business will be short of money and take appropriate steps beforehand. In this estimation it is also important to leave room for the possibility of new events, and miscellaneous conditions that could impact cash flow.
Who should you involve when planning?
Creating a comprehensive budget requires you to involve members of all departments. You should talk to all your teams and consult them on their expectations, and requirements for the financial period as each team can bring useful input to the process.
Make sure to continuously review your budget throughout the year against actual numbers. Using up-to-date budgets will help you manage your cash flow effectively and identify what needs to be achieved in the next budgeting period.
Overall, the process of preparing a budget should be highly regimented and follow a set schedule, so that the completed budget is ready for use by the beginning of the new financial year.
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