One of the biggest mistakes company owners make when putting together their budgets and financial forecasts for the next financial year?
Leaving the work to your accounting team.
You need to take a very active part in this process, too – even if you are not that interested in numbers or the accounting side of your business.
Here’s why.
In my last email, I explained that it’s wrong to think of a “budget” as a spreadsheet showing how much you will spend in different categories – as so many people do!
It’s actually a planning process, where you think deeply about your financial goals for the coming year (and beyond), and determine what actions you are going to take to achieve them, and by when. It’s more akin to a detailed business plan, backed by numbers.
Your forecast is the financial result you will achieve if your budget plan succeeds. It’s not a wish – “we’ll grow by 15%”. It’s a calculated result of all the actions you’ve set out.
In short, budgeting and forecasting involves deciding the fundamental direction your business will take over the next few months. It’s up to you and your management team to have this critical conversation – and to reach consensus. If you leave this to your accounting department, you will have lost leadership of your business.
Now, don’t get me wrong. I am not suggesting that you leave your accountants out of it, or Rather the opposite.
The process is a collaboration.
Your accountants will turn your budget plans into a financial forecast. They might come back and tell you that the numbers don’t add up, that you don’t have the funds to accomplish some of your goals or that some of the actions you’re planning won’t achieve the results you want.
Then you’ll have to adapt your plans to make the financial forecast work.
But more than that, the right accounting team will lead the process. When they’re in the room with you, they can ask the right questions (“Why do we want to grow by 10%? Why not 15%?”), and challenge your thinking as you work out your goals – all with a financial lens that your senior management team might otherwise lack.
Like I said, a collaboration.
That’s the exact role we play for our clients, when we help with their budgeting and forecasting.
This is an essential part of our work, because we’re here to help you maximise your profit and grow faster. And both those things happen more easily when you are working to a clear budget and forecast, so every action you take has been thought through carefully to achieve your financial goals.
To find out more about our outsourced financial management and how it can help you, get in touch with me today. Simply hit ‘reply’ to this email, or call us on 01279 647 447, and we’ll arrange a no-obligation chat about your financial management needs.
Warmly,
Garry
