If you’re like many business owners, you may find yourself struggling to understand what your finances mean or how you can use your financial information to make decisions for your business. Often we get into business because we love a product or service we want to provide. It’s not as common that we love managing the financial aspects of our business. 

As a business owner, you have your best chances of success when you regularly set budgets, develop financial forecasts, and establish goals. Here’s what you need to know about all three activities. 

They are invaluable tools for businesses

Budgeting, forecasting, and goal setting are tools that help you manage your finances effectively. A budget is a plan for how you will spend money in the coming year. It’s also a way of setting goals, such as opening another store, expanding your product line, or hiring more employees. Forecasting helps you look at your finances in the short term to make sure they align with the long-term strategy of your business. Goals help you establish your financial priorities and set a plan for moving your business forward. 

Why you need a budget

A budget is a plan for how you will spend the money your business has. You can think of it as a roadmap that helps you reach all the goals and objectives in your business, including financial ones.

By having a budget, you’ll be able to control cash flow. A budget will help ensure that your business stays on track with spending so you don’t pay out more than you’re bringing in. It also lets you know when you have enough money in your accounts to meet expenses such as payroll, taxes, and bills. If you don’t have enough money to cover your expenses, you can look at your budget and revise it, to free up additional money.

Lastly, budgets allow you to understand how money flows into and out of your business, which makes it easier to meet your immediate financial needs while planning a sustainable future.

Financial forecasting helps you determine where your business is headed 

Forecasting is a great way to determine where your business is headed in terms of profit and loss. It helps you predict future cash flow, sales, expenses, and more.

Financial forecasting can help you take control of your finances by enabling you to anticipate what might happen in the future and plan for it accordingly. This can help prevent overspending or under-budgeting during slow periods or high-demand seasons. Also, it allows you to provide accurate budget projections when seeking funding from banks or investors.

Goals help you budget and forecast more effectively

Your goals enable you to set a vision for your business and implement steps to achieve it. For example, if you know that you want to bring in 100 new customers in the next two months, you’ll need to explore whether your marketing budget can accommodate that, and adjust accordingly.
If your goal is to hire additional staff you can look at your forecast to determine the best time to hire–and how long it will take you to build up the revenue to bring in new people. 

Additionally, goals enable everyone on your team to know what you’re working towards, so they can feel engaged in the process and take ownership over progress. 

Final thoughts

Budgeting allows you to understand how money flows into and out of your business, which makes it easier to meet your immediate financial needs while planning a sustainable future. Forecasting encourages you to examine your records and anticipate the future, so you are prepared for fluctuations in your cash flow. Goal setting creates your vision for the future, so you can identify financial priorities.
All three are important to building a sustainable and thriving business. If you’d like to learn more about how we can help you with your budgeting, forecasting, and goal setting, contact us today.