Budgeting in an uncertain time – Part 1: Why does a budget matter?
Let’s be honest when it comes to working to a budget, things don’t always go exactly to plan! There are so many variables involved that it’s nigh on impossible to predict everything, and particularly things like steady sales, or even steady expenses for that matter.
So that raises the question – why bother to even have a budget?!
The benefits of budgeting
Across history I’m pretty sure no franchise business owner has ever said, “damn I wish I hadn’t invested so much time putting together a budget that gives me a clear financial picture of my business and where it’s going!” And that’s because savvy franchise owners understand that a clear and comprehensive budget is worth its weight in gold!
A budget...
Provides a clear and measurable financial target, and things that are measured get done!
Offers a plan of action for the steps required to reach financial goals
Focuses individual and collective minds on an end target
Shows if the franchise business is on or off track, and measures to take to course correct
Brings regular focus to the financial aspects of the franchise, which is an extremely good habit to cultivate. Regular eyes on the figures ensures nothing slips through the net or is left to fester and potentially bite you on the bum down the line!
Getting ready to budget
Sitting down and writing a budget can feel daunting, especially if you’ve never done one before!
So, let’s break down the initial steps to take that will enable you to put your budget together:
Information gathering – Your starting point is to collate as much information as possible about your past financial activity. Dig deep so you’re armed with all the facts and figures you need.
What’s changed? – Using the information you’ve gathered, look at what’s changed in your franchise business. For example, have you gained new regular customers? Have you offered new services? Are there any extra regular expenses you’ve taken on? Have you sold or changed anything major (for example have you moved premises)? And so on.
What do you know is coming up? – Are there things like additional tax adjustments to come out of your budget? Do you need to factor in an annual price increase? Have you got any big projects on the horizon? Ensure you look at all areas of the business.
What’s happening in your market? – Have new competitors emerged? Is there new legislation being introduced that you’ll need to implement? Research and build as clear a picture as possible.
Make some notes – As you work through the previous points, note down all the relevant information so you have it to hand ready to feed into your budget.
Have a notepad at the ready – When you move on to working on your budget actions will occur to you, and you’ll want to note these down as you go so you don’t forget them.
Most importantly – take your time!! You’re doing essential groundwork here to create a comprehensive budget, so rushing through these steps at a million miles an hour is not going to benefit anyone. Be methodical and thorough with your approach and leave no stone unturned.
If the idea of budgets feels overwhelming and you’d like some support, the Franchise Accounting Specialists team are here to help so get in touch – we’d love to hear from you!
