By Amy Sims

In 12 month’s time what will be something that will make you think, “jeez that was a great year?”

Is it…? reducing your debt… expanding into bigger premises…. retaining your employees…. growing your customer base…. improving your relationship with suppliers… having a decent holiday…. maybe it’s a combination of all these things or maybe it’s as simple as continuing to do what you are doing now (without wretched COVID-19, of course).

Now that you know where you want to be this time next year, how are you going to get there?

We could talk about setting goals, breaking it down into your big picture, super goals and your ultimate why - but instead we are going to talk about budgeting (insert eye roll).

Budgeting is an essential part of the day-to-day running of your business. A good budget gives you direction and an evolving budget makes you accountable. Too often people spend hours putting together a budget to assist with finance or for other reasons. Then it gets filed away and not looked at for 12 months or until they need more finance. Once you have done a budget make sure you revisit it regularly, perhaps at the end of the quarter or each month.

Tip #1 – Setup a squirrel fund

If you receive any money which was not included in your budget, you should squirrel this away into a separate account or use this for something not included in your budget. Otherwise, this windfall will just be soaked up in the business. What did you do with the cash flow boost received last year?

How to do a budget

A budget sets out your income (inflows) and expenses (outflows) on a month-by-month basis. It should also take into account GST, income tax, capital purchases and drawings.

The first time you do a budget it can be a little daunting. Start with your expenses (outflows) and look at last year’s actuals. This will give you an idea of the amount you paid and when you paid it. You can then assume the timing and amounts of these expenses will be roughly the same again this year. Now that you know what your expenses will be for the year, how much income do you need? Again, you can start with last year’s actuals but tweak these with price increases and for lessons learnt from the previous year.

Tip #2 – Check your starting point

Make sure you have the correct opening bank balance at the beginning of the budget period. You will then be able to see what your estimated bank balance will be at the end of the budget period. It will also identify if you need an overdraft facility from your bank and what your peak debt will be.

The Fun Part

Once you have the basics included in the budget, now comes the fun part. Play around with the budget to give the best possible outcome. You may want to adjust the timing of some of your expenses to ensure you don’t have to use an overdraft. If you were to ramp up your marketing, would this lead to increased sales? Perhaps you can include some of the items on your plant & equipment wish list but how much more income will you need or what other expenses will you need to cut back on to make this achievable?

Tip #3 – Waste Audit

Thankfully, you do have control over most of your expenses. You can choose how much to spend on certain items. Whether you change suppliers for a better price or cut back on the expenditure. Ask yourself is the expense essential to the running of your business? Completing a waste audit is the process of reviewing each expense item and looking at ways to trim back.

Accountability

Now that you have completed your budget and you have a clear direction for the year ahead it is time to be accountable. Make sure you compare your actuals to the budget regularly. Take the time to understand why there is a variance. If something changes drastically, perhaps a virus attacks the entire world, then you need to update your budget.

Celebrate the wins and learn from the shortfalls.

If you need any help to prepare your budget or staying accountable, please get in touch with your accountant. Fingers crossed 2021 will be a great year for your business!

The Lincolns Rural Tour is on now! We will be on the road throughout February and March. Visiting 13 towns to deliver FREE seminars outlining Tax Planning + Asset write-off, Farm Succession and Human Resource compliance.

Get FREE tickets and view all details here.

We are heading to:
Borden • Jerramungup • Ravensthorpe • Nyabing • Lake Grace • Frankland • Gnowangerup • Dumbleyung • Hyden • Wickepin • Green Range • Scaddan • Cascade

Attendance is free and open to all, with tea and coffee on arrival and a light lunch provided. For all tour information visit our Events Page.

A coffee with… Tayla Winmar

Robin Walmsley and Emmalee Crispin recently sat down and had a coffee with our 2020 Gap Year student Tayla Winmar before she heads off to university in February.

Lincolns’ Gap Year program has been running since 2008 and has an amazing reputation within the community. The role involves working in our administration team and gives the student an insight into an office environment. Our former Gap Year students have gone onto a diverse range of career paths from teaching to medicine. Lincolns is proud to have played a part and a fundamental role in the development of young people over the years. Read more…

Get Squirrelling!