Friends, it is the beginning of a new year, and how many of us are working off a newly built budget? I would imagine most, if not all, had their hands raised. Budgets are a necessary evil, especially in the workplace. We love to hate them, but they are the lifeblood of a business’s operations. In a recent survey by Clutch, 74% of small businesses under ten employees did not create a corporate budget. In return, 79% of small businesses with ten or more employees did create a corporate budget. What does this tell us? As companies grow and mature, the need for a budget is critical. Matt Buckner, Founder & President of ShoreSource Business Solutions, has an easy 3-step process that all companies, no matter size, can accomplish.
Step 1: Get organized.
Have you properly tagged all of your expenses and payables in your accounting software? Have you even entered them all? We are not judging, we promise! If not, now is the time to commit to doing that on a weekly or monthly basis. Don’t get yourself in trouble by waiting until the end of your fiscal year. TIP: If the task of keeping up with your accounting sounds daunting, consider an outsourced bookkeeper. We promise it will make your life easier.
Step 2: Forecast your A/R & A/P
Your bookkeeper/accounting software has the capabilities of forecasting your accounts receivables and accounts payable based on past years. Do you have a consistent stream of revenue throughout the year, or is it seasonal? Do you sell a product used in the summer months and see increased sales in early Spring and Summer? Map these financial trends out for the year and evaluate your companies burn rate. TIP: If you are not familiar with a burn rate, check out our blog post How Quickly Is Your Business Burning. Matt, ShoreSource President, works with his clients on this task at the start of each engagement. He wants to ensure he fully understands the ebbs and flows of the business while providing data to support financial trends are working for you, not against you. We all know you need money in a business to survive. Be smart with your accounting. As Benjamin Franklin once said, “If you fail to plan, you are planning to fail”.
Step 3: Payout your A/P on a schedule
Based on your accounting forecast, pay out your accounts payable on a schedule. Check the deadline for your bills – net30, net60, net90, etc. Please don’t feel obligated to pay a statement the same week you receive it. Set your expenses up on a schedule to pay out one bill per week, for example. One account a week should not wreck your books, whereas paying fifteen bills in one week could certainly do that. In most cases, vendors will set up automatic payments drafted on a specific day of the week and month. Consider this option if you feel comfortable with your forecast trends and schedule for expenses.
Again, the budget is in place not to make our lives miserable or hard. The budget is in place to make our lives easier. Let’s make Benjamin Franklin proud and plan to succeed in 2021. Are you interested in learning more about ShoreSource Business Solutions, LLC?
Feel free to reach us at 843.729.2961 or firstname.lastname@example.org.