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Important 2014 Budget Information

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In a recent meeting with a client, we started off with a review of what a budget looks like.  For any one that hasn’t bothered with one in the past, this is an excellent step to increasing the financial process for your business.

2014 is coming.  Is your budget done?
Budgeting 101
Why bother spending your valuable time creating a budget?There are many reasons but let start with this one, you want to drive your business not let the business drive you.What are the main steps to creating an annual budget?

  1. Monthly projected revenue by LOB (Line of Business)
  2. Where is the growth/change in the business and how are you going to get there
  3. With the above defined and its impact thought out, you can then make changes to your expense and CapEx (Capital Expenditures) budgets.
  4. All of the above will now give you an ability to predict future cash flow.

In order to execute these steps you will need:

  1. Last two years of actual revenue by LOB
  2. Last two years of expenses by categories
  3. 2014 growth expectations by LOB
  4. Last two years of your Balance Sheet

 

In working with my clients I have found that they sometime face the following challenges that have stopped them from creating an annual budget.

  • They don’t have the skill set to read a financial statement and balance sheet
  • Their income and expense accounts are not categorized correctly
  • They have not planned their business GOALS or have, but haven’t spent the time planning exactly how they are going to make those goals into reality
  • Their current financials are in a state that is not usable for any real business decision making.

Most business owners rely on their bookkeeper and/or tax accountant to “take care of their books”.  What they don’t realize is that the bookkeeper and tax accountant are focused on aspects, which although critical, don’t give you the whole picture.  That is where your CFO comes in.  Your CFO is the one that should set out the structure of your financials, so that your bookkeeper is creating good financial data, your tax account has what they need to file your annual return AND you have the financial business tools to drive increased profitability and cash for your business.

If this has sparked some questions or needs, just reply to this email or give me a call for a complimentary consultation.

 

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