There are many tools and methods available for compiling a budget. One factor that will help your business gain value from a budget is keeping it relevant. If it isn’t, the budget won’t get used and will “sit on the shelf” rather than adding the value that it should.
Below is an example of a business whose budget came down to one relevant key indicator to guide its operations.
The Business Plan. The business was an allied health business. The owner had been working in this industry for over 20 years. The practice had a single location.
The owner’s main goal was to take home a certain salary whilst continuing to run their practice. There was no desire to expand or exit the business.
Review the Business and Constraints. Time was then spent understanding the business and its current obligations. The price charged for its services was comparable to others operating similar business. The salary the owner was looking to receive was also identified.
Build a Budget. A budget reflecting the business’ operating goals and its constraints was then compiled. This contained all the standard worksheets, cash projections and breakdowns.
Make it Relevant. The last step is to extract from the numbers the business’ key activity (or activities). In this example it was the number of sessions booked a day, with the target being 4 sessions a day. This became the key measure of the budget, or some might call it the operations’ budget. Having this key measure made tracking against budget simple and relevant.
This example is of a smaller business, but the same principle applies to any size business. Larger businesses will have more key measures, but they need to remain relevant for the budget to be of value.
Justin Hogg is an Accountant and CFO for Businesses, Founders and Entrepreneurs. He manages the numbers so that you don’t have too. He offers an initial complimentary 30 minutes session to see if he can help you to save business costs and reduce risk.
To arrange an initial, complimentary discussion, email me firstname.lastname@example.org or call 0414 896 696.