Check in with your accountant this month to understand how your tax liability is tracking for this financial year. Do you need to make any adjustments, invest, spend, save? Don’t hide from doing this, as if it is good news you want to celebrate—and if it is bad news you need to be on the front foot.
Constructing your annual budget
Budget: A document used to project future income and expenditure for a specific period of time.
Budgets are key to the success of a business. A car has a dashboard that keeps you up-to-date with how the car is functioning and what might need attention. A budget does the same for a business; it shows what is working and what needs attention.
‘Don’t tell me where your priorities are. Show me where you spend your money and I’ll tell you what they are.’—James W. Frick
At Sorted., our annual budget is constructed over a cup of tea, with plenty of excitement about what we can create. Nadine and Clare sit down once a year to review the previous financial year figures and set targets for the year ahead. This is entered into QuickBooks online, and actual versus budget is reported each month.
The annual budget target figures are also reviewed against the annual business plan, to see which areas require focus in terms of building sales/profit. The business plan is also updated to ensure the focus moves with the figures.
‘Annual income twenty pounds, annual expenditure nineteen six; result happiness. Annual income twenty pounds, annual expenditure twenty pound ought and six; result misery.’—Charles Dickens
Nadine and Trish, our accountant, are also empowered to provide honest and open feedback regarding observations around the budget and suggestions to support reaching the targets. They do this regularly, which means the annual budget is constructed as a result of a team approach—not just coming from the director.
Key to the discussion about the budget is the ability to reach targets, whilst also making an active contribution to the community—billing sixty-hours a week for one person to reach a target is not an option—targets must be realistic and not compromise on our values.
‘The safest way to double your money is to fold it over and put it in your pocket.’—Kin Hubbard
Make sure that you have a budget and review it on a regular basis AND use the data to inform your decision making and business planning.