What are the budgeting mistakes to avoid for growth?
With a budget, you should be poised to take the business to the next level of growth. It’s the playbook of your vision for the business marked by the numbers and plans to achieve them. Unfortunately, things may not unfold as planned. The following budgeting mistakes could have occurred.
1. Overambitious profit goals
It’s good to be ambitious. As the business owner, your positivity can be contagious. It keeps stakeholders driven. Staying pragmatic, however, is important too. Unqualified profit goals can be an exercise in chasing shadows. But by looking at previous numbers, you can keep your ambitions in check. While deliberating on them, you’ll grow more aware of conditions that can facilitate or hinder the realisation of those profit goals.
2. Understating costs
It’s rare for business costs to dip. We constantly wish for it to happen. Even when they do, something else will wipe away the savings. If you’re looking to raise profit margins, you’re likely to be increasing your spend on, for example, advertising, sales cost, expanded workforce or new technology. They can bump up your cost quite a bit. You’ve got to factor them into the budget. For example, fluctuating exchange rates may affect the cost of imported raw materials or machinery.
3. Underestimating the strategic role of cash flow forecasts and management
If the budget is a vehicle to drive growth, cash flow is the engine that keeps it moving. Without knowing when and how much money is coming in and going out, you may be at risk of trying to drive the vehicle on an empty tank! Proper cash flow forecasts and management is critical. Not watching it may leave you stranded in the middle of nowhere in your journey of growth.
4. Discard the shoebox mindset
Accounting has advanced dramatically in the last decade. There are tools to help you manage your budget effectively. Gone are the days when receipts and invoices are piled up in a shoebox. They can easily be uploaded to the Cloud and retrieved when you need them.
For help with avoiding budgeting mistakes and all other accounting matters, contact Sydney Accounting today on (02) 9810 3222