EOFY Fast Approaching
This time of the year all the slogans start with EOFY this and EOFY that and although there are some great business bargains that are available, business owners must not neglect that with every financial year end comes a new financial year.
A new financial year gives the opportunity for business owners to strategise on how they are going to work on their business in the next twelve months. If you have made the new financial year’s resolution that this will be the year that you finally start doing budgets and cash flow forecasting, it is time to do something about it now!
You may ask, what is the benefit of having a budget and cash flow forecast in your business; quite simply it allows you to understand the direction your business is going and whether you need to do any corrections. Yes, budgets have been known as black magic where no one really can predict the future but at least knowing your boundaries should allow you to relax a little.
A budget allows you to set targets on what the business will be earning in income or incurring in expenses. By having a budget, businesses are able to compare their actuals against the budgets to see where variances lie and to take action before these discrepancies cause problems in the business.
A cashflow forecast enables the business to estimate the amount of cash available at any point in the future. It takes into consideration cash in bank, any collection of cash from clients and any liabilities to suppliers and employees. By forecasting a cash position, business owners are able to look to see if there will be shortages or excesses and to take action in the present to avoid problems.
Most importantly these two reports will allow you to understand where the business is going and whether it will have the ability to facilitate growth, require additional revenue streams or rethink on how expenses are being incurred.
The most important step after having completed a budget and cashflow forecast is to sit down with your bookkeeper monthly and understand your journey through FY18/19 and make corrections along the way… there is nothing worse than “if only I had known” syndrome.