Financial Business Review and Budgeting

Edwards Bailey Chartered Accountants are here to help you with preparing budgets for business, whether preparing a budget to start a business, preparing a business cash flow forecast or preparing a business forecast report our highly qualified team will work with you to fully understand your business, and implement tailored budgets and forecasts to help you and your business plan for the future.

Financial Business Review

At Edwards Bailey Chartered Accountants we offer a financial business review and budgeting service which utilises our years of experience working with businesses from various sectors and at different stages of their business lives.

As part our financial business review and budgeting service we:

  • Review how a business has performed
  • Compare results to competitors
  • Look for cost saving measures
  • Assist with preparing budgets for business
  • Assist with preparing forecasts
  • Implement systems to measure performance
  • Help you understand what makes your business tick

Reasons for Budgeting in Business

There are many reasons for budgeting in business, whether its to set goals for yourself, set goals for your team, review whether your business can cope with seasonal peaks and troughs or to review when your business should have enough cash available for that new project; just to name a few reasons.

Edwards Bailey Chartered Accountants are here to help you with preparing budgets for business, whether preparing a budget to start a business, preparing a business cash flow forecast or preparing a business forecast report our highly qualified team will work with you to fully understand your business, and implement tailored budgets and forecasts to help you and your business plan for the future.

By using our financial business review and budgeting service you can be sure that all eventualities will be reviewed and your budgets and forecasts will be based on industry knowledge, rather than simple estimates.

Benefits of Budgeting Business

There are endless benefits and uses of a business budget. Budgeting and forecasting helps give you, your team and your business direction and a common goal to aim for.

It also provides a baseline to measure your businesses performance against, otherwise you will never truly know if your business is doing well or just ticking over.

The factors above are what can really help your business grow and meet your longer term goals. We really cannot stress the importance of preparing budgets for business.

Budget to Start a Business

We cannot stress how important it is that you budget to Start a Business. It is very easy for costs to spiral out of control when starting a new business, which is why many businesses fail within the first 2 years of trading.

A sales forecast for a startup business is often where new business owners start, but often do not complete a full Budget to Start a Business, a financial forecast for new business or a cash flow forecast for startup business. The problem with this is that costs can quickly outweigh sales and cash quickly runs out.

Not preparing budgets for business can be the difference between success and failure, that’s why using Edwards Bailey Chartered Accountants financial business review and budgeting service can help you start your new business with the best foundations possible.

Uses of a Business Budget and Forecasts

There are both internal and external uses when preparing budgets for business, a business cash flow forecast or a business forecast report.

Internally our financial business review and budgeting service can help: 

  • Set you and your team targets
  • Help motivate your staff by having a shared goal
  • Help you understand when your business will be able to afford new assets
  • Help understand any seasonal trends your business may have
  • Help you set a reserves target to get through those quitter times of year.

Externally our financial business review and budgeting service can help:

  • Present expected results to potential investors
  • Help with obtaining finance from lenders
  • Help obtain asset finance from finance providers
  • Assist with tenders if a potential customer needs assurance that your business will continue in the future.

How can Edwards Bailey help you?

Our aim is to ensure we help our clients attain their goals.

Typical Business Budget Categories

Whether you are preparing budgets for business, a business cash flow forecast or a full business forecast report there are some typical business budget categories to think about.

Sales

The normal starting point when preparing budgets for business or a business cash flow forecast is sales, which can be difficult if you a start up business. If you have an established business the best place to start is by looking at historic performance. Whether preparing budgets for business or a business cash flow forecast you need to make sure your sales forecasts are realistic, otherwise your forecasts will be worthless.

Stock Purchases

If you sell goods, forecasting the cost of purchasing stock is critical when preparing a business cash flow forecast. You always need to consider whether the cost of your stock will increase over time, whether the cost will decrease if the volume your purchase increases and when you are likely going to need to stock up again.

Rental and Premises Costs

Whether you operate from a shared workspace, an office or a warehouse, rental and premises costs always need to be included. One area that is often overlooked here is rates and council tax. rental and premises costs should be fairly easy to forecast as normally they will remain consistent each month.

Utilities

This will include electricity, gas and water costs. You should be able to work out a good estimate for each month based on the costs incurred previously. If your tariff is coming to an end, make sure you forecast an increase in the monthly cost for the eventuality that your utility costs will go up.

Telephone and Internet

Telephone and internet costs should always be included in your budgets and forecasts, as it can be very easy for these costs to spiral out of control if the actual costs incurred are not compared to your budget. One point that is often overlooked is mobile phones for staff.

Wages and Salaries

Wages and salaries are often one of the largest outlays a business has, for services companies especially. Forecasting wage costs can be simple if your staff are paid the same each month, but if staff are paid an hourly rate it can be very difficult. Some of the areas that are often overlooked are Employers National Insurance, Employer Pension Contributions and Sub-contractors/temporary staff.

Travel and Motor Costs

Travel and motor costs should encompass everything travel and vehicle related such as MOTs, vehicle repairs, fuel, flights and train fares. This can be difficult to estimate, but usually looking at historic trends is a good start. The areas that are often overlooked are employee expenses and parking/speeding fines.

Training

Staff training is vital to ensure you are getting the most out of your team but can be very costly. We recommend reviewing the likely costs that will be incurred by completing some market research and considering when the training will likely take place.

Printing, Postage and Stationery

Office costs like printing, postage and stationery are not normally at the forefront of a business owners mind, however the cost of printing alone can quickly mount up. Forecasting office costs like printing, postage and stationery is not an exact science, but estimating how much it will cost your business will help keep costs under control.

Computer Software and Equipment

Depending on which sector your business operates in, the cost of computer software and equipment can be significant. Whether it’s a specific piece of software for your business sector, Microsoft Office or anti-virus you need to consider when any annual licenses will need to be renewed to accurately forecast your software costs. The area often overlooked is when will the equipment currently being used be out of date and need to be replaced.

Advertising and Marketing

Advertising and marketing is a very flexible cost. Some businesses spend fortunes advertising and promoting their business, whereas others rely on word of mouth referrals. This cost can quickly spiral out of control and it is vital to manage it correctly. When preparing a budget to start a business you need to consider how your advertising and marketing spend will directly impact your sales, as these two categories tend to go hand in hand.

Insurance

All businesses should have adequate insurance, however as this cost is normally incurred just once a year it is very easy to overlook when preparing budgets and forecasts. You need to include all insurance policies in your forecasts, whether it is car insurance, buildings and contents insurance, professional indemnity insurance or public liability insurance.

Taxes

The most overlooked category, especially when preparing a business cash flow forecast, is taxes. If your business is VAT registered you will be paying HMRC every quarter, if you have employees you will be paying PAYE every month, if self-employed you will be paying income tax twice a year in January & July, and if you are a limited company you will be paying corporation tax once a year. All of these figures will be dependant on other figures within you budgets and forecasts so can be very difficult to budget accurately.

How to Make a Budget for a Small Business

Below we have detailed our tips on how to make a budget for a small business.

Whether preparing budgets for business, a business cash flow forecast or a full business forecast report, the key point is that no two businesses are the same so budgets and forecasts need to be specific to you and your business. 

If you preparing budgets for business based on simple generalised estimates they will never truly help you and your business, that is why as part of Edwards Bailey Chartered Accountant’s financial business review and budgeting we get under the skin of your business to identify what makes it tick.

Factors to Consider When Budgeting for a Business

As every business is different there is an infinite number of factors to consider when preparing budgets for business, a business cash flow forecast or a full business forecast report.

Some of the key factors to consider when budgeting for a business are:

  • Value – how much will something cost or what is the sale price
  • Timing – when will the cost be incurred or the work/goods invoiced
  • Cash – when will the costs be paid for or the cash be received for your sales
  • Taxes – what taxes will your business be paying and when will they need to be paid

One of the of the main factors to consider when budgeting for a business is that everything can change. You need to be able to adapt your business to meet new challenges and this is not possible without proper budgeting and reviewing actual performance against forecasts. 

Our financial business review and budgeting service will be tailored to your business in order for us to meet your individual needs and help get through the challenges you and your business may face.

Challenges of Business Forecasting

The challenges of business forecasting are numerous and can lead to your business forecast report not being worth the paper it is written on. 

Some of the main challenges of business forecasting are:

  • Identifying trends in historical sales and expenses
  • Calculating how taxes will be impacted by changes in results
  • Working out the correct timing for when expenses will be incurred
  • Working out when cash will be paid or received when preparing a business cash flow forecast

One the biggest challenges of business forecasting is uncertainty. In the world of business anything can happen, and you need to be able to adapt.

Using our financial business review and budgeting service when you are preparing budgets for business, a business cash flow forecast or a business forecast report you can be sure that no stone will be left unturned and your forecasts will utilise our experts industry knowledge to ensure your budgets and forecasts predict future trends as accurately as possible. 

Business Cash Flow Forecast

What is the difference between preparing budgets for business and a business cash flow forecast.

A budget or forecast will look at sales invoices and expense invoices, where as a business cash flow forecast will look at the inflow and outflow of cash.

At the end of the day cash is king and many people overlook this when preparing budgets for business. When you raise a sales invoice you may not receive the cash for 30 days, when you receive a purchase invoice you may not have to pay it for 30 days or sometimes customers are unable to pay you altogether. 

That is why preparing a business cash flow forecast is vital for every business to identify pinch points when cash may be tight and additional finance may need to be considered.

Our financial business review and budgeting service will help you accurately predict these potential pinch points so you can be prepared to take the necessary action to help your business succeed.

Small Business Marketing Budget Example

Budgets and forecasts do not need to be prepared on a business as a whole. If you can separate your business into different operational sections, you can prepare specific budgets for each area.

Below is our marketing budget example for small business:

Small Business Marketing Budget Example

Annual costs:

Google Ads £5,000

Marketing Material £2,000

Billboard Advertising £12,000 

Email Campaign (Staff Time) £8,000

Social Media Manager £12,000

With these costs the first step is to identify when they will be incurred. For example, Google Ads and staff time will likely be incurred in equal instalments each month, where as marketing material and billboard advertising may be incurred sporadically throughout the year. 

Below is a finished marketing budget example for small business:

 

CostJanuaryFebruaryMarchAprilMayJuneJulyAugustTotal
Google Ads£625£625£625£625£625£625£625£625£5,000
Marketing Material£2,000£2,000
Billboard Advertising£4,000£4,000£4,000£12,000
Email Campaign£1,000£1,000£1,000£1,000£1,000£1,000£1,000£1,000£8,000
Social Media Manager£1,500£1,500£1,500£1,500£1,500£1,500£1,500£1,500£12,000
Total Spend£7,125£5,125£3,125£7,125£3,125£3,125£7,125£3,125£39,000

How can Edwards Bailey help you?

Our aim is to ensure we help our clients attain their goals.

Frequently Asked Questions?

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What is financial performance management?

Financial performance management takes many forms. It can be as simple as reviewing how your company is performing against the prior year or as complex as comparing your results against your competitors.

Managing this process can be very time consuming and if not completed accurately can result in you having misleading results, which could lead to bad business decisions.

How to improve financial performance of a business?

This is different for every business. Very small changes and efficiencies in businesses operations can lead to huge improvements in financial performance.

It could be renegotiating terms with a supplier, more accurately monitoring your staffs time and productivity, or even increasing your prices to be in line with your competitors.

As a business owner, it can sometimes be difficult to see the wood through the trees. Using a consultant to complete a cold review of your businesses financial performance and operations can lead to discoveries and recommendations that you had never even considered.

How to Monitor Financial Performance?

The first step of monitoring financial performance is management accounts. Without accurate and timely management accounts it is near impossible to monitor a company’s performance.

Once management accounts are prepared the next step should be setting, budgets, forecasts and identifying the key performance indicators for the business.

These can then be used to accurately monitor the performance of your company.

What is Financial Performance Analysis?

Financial performance analysis is completing a more detailed review of financial performance. It can include looking at trends, comparing results to competitors, comparing results to sector-specific indicators, reviewing finer details like the purchase price of goods or even how long it takes for stock to be sold.

How to evaluate financial performance of a company?
There are lots of different ways to evaluate the performance of a company, and it depends on what the management of the business want.
 
Some of the performance indicators used to evaluate whether a company is performing well are:
- Sales growth
- Gross profit growth
- Gross profit margin
- Operating profit growth
- Operating profit margin
- Cashflow improvements
- Cash increases
- Debtor recovery
- Stock turnover
- Liquidity improving
- Footfall
- Staff productivity
- New client wins
 
 

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