Why Budgets and Forecasts are Important in Business

Why Budgets and Forecasts are Important in Business

If money were no object, would you do what you do?

Nearly all businesses start with an idea, a passion, or a drive for a better lifestyle. Their success and in some cases failure, often comes down to financial performance and money management. Some failures are created by circumstances outside of the business owner’s control. Most are caused by a business owners decision, action, or failure to act. Making a decision and taking the right action relies upon up-to-date information like accurate accounts. 

Tools that help businesses plan for the future, manage risk and be rewarded include budgets, forecasts and periodic reviews of your business’s management accounts. In Australia, 63% of small businesses neglect these things which is interesting when compared with the often shared axiom that 60% of small businesses in Australia fail within their first three years.

In over your head? Don’t worry, Elaine Wade and the team at Accurate Accounts are great at doing the hard bookkeeping work for you and expertly translate management accounting terms into everyday concepts so you can focus on activities that enhance your small business success.

Let’s start with the difference between a budget and a forecast

A budget is a planning document. It details the future results and financial position that a business hopes to achieve in a certain time-frame, usually one year. A budget is a measuring stick to evaluate your goals and performance and is a key aspect of managing financial health. 

A forecast is an indication of what is actually occurring and is typically limited to major revenue and expense items. Forecasts are updated at regular intervals and are used to make short-term operational decisions often based on cash flow.

Now, if you are really serious about the success of your business then your bookkeeping needs to be accurate and up to date, and you should periodically review your management accounts. Typically management accounts for small business include a profit and loss, balance sheet, cash flow statement and a short report that gives the numbers meaning. 

Budget preparation, bookkeeping and management accounts reviews are services offered by Accurate Accounts giving you peace of mind while you pursue your idea, passion and balanced lifestyle. Contact us on 08 6243 1623 for your FREE consultation.


Leave a reply

Your email address will not be published. Required fields are marked *