The time has come! As we wind down 2014, I can’t help but think that 2015 will be upon us before we know it. That means doing 1099s, getting the W2s out, trying to wrap up “the books” to get to the accountant, and so on. Of course, with a new year also comes New Year’s resolutions. Many businesses won’t plan to create a budget until 2015. I say, why wait until January?? Get started on that budget NOW, and reap the rewards in 2015!
There are a few things that make a budget work the way it’s supposed to:
- Create it before the time period you’re planning for.
- Do so based on numbers and trends from previous periods.
- Compare/Review Actual to Budget regularly.
- Adjust the budget going forward based on your review.
The rewards you can expect for putting in the extra time and effort? Easy as ABC:
- Accurate cash flow forecasting: minimal surprises = minimal stress
- Better understanding of “your numbers”
- Conversation topics to have with your CPA or financial advisor throughout the year
Getting Started
First – and most importantly – you need an accurate set of books. The goal is to have accurate and relevant financial statements on a timely basis. QuickBooks works very well for this. Keep that file up to date monthly: enter all of your checks and deposits, reconcile the bank accounts and credit card amounts, take a look at loans (at least) quarterly and book the Interest expense. If you’re not sure how, ask for help! Remember, you didn’t start your business to spend hours on the bookkeeping.
Secondly, you need to review your numbers at least quarterly, preferably monthly. Take a look at the Balance Sheet and Profit and Loss. Compare them to prior periods. Do the comparisons make sense? Research any material differences. Once you’re confident of the numbers, review them against your budget.
Cash Flow Effects
How does all you’ve reviewed affect your cash flow? If you know you’re going to be low on cash in a few months, you’ve got the time to budget. Or, if you’ve got some extra cash now, you know where to allocate it to make the best business/tax sense. Still not sure? Ask your CPA or financial advisor. You now have laser specific information and questions to discuss with them…ahead of time.
In summary, incorporate the above into your “End of the Year Resolutions” and you will find yourself less stressed and ready for the year ahead! And the icing on the cake: Next year at this time, your budget will already be prepared for 2016, based on accurate, relevant, and timely information gathered and reviewed consistently in 2015. That means more time to relax and enjoy the holiday season!
If you’d like to schedule a 30-minute bookkeeping assessment, Contact Me Now.
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