The finances of a business must be carefully worked out to enable the achievement of short, medium and long-term goals. Likewise, without a business budget, it is more difficult to measure the results obtained and success can become increasingly distant. Want to learn how to build an accurate and strategic business budget? Check out 4 steps to put into practice!
Definitely, a venture that wants to be successful needs to be financially organized. Thus, the work begins with a diagnosis of the current situation and goes through the projection of the company’s future, aiming to align the two points.
1. Assess the current financial situation of the business
First of all, to build a business budget, it is essential to assess the current financial situation of your business. In this sense, this detailed analysis allows understanding how the company’s finances are and serves to identify issues that may influence future success.
When carrying out the task, you must examine important data such as balance sheets, income statements and cash flows. As a result, these accounting records provide a clear view of available resources, financial obligations and performance trends.
Also, through this assessment, it is possible to recognize areas for improvement, such as cost reduction, tax opportunities and increased revenue. From the same point of view, you will have more clarity about any problems, such as high debt, late payments or insufficient working capital.
Still, knowing how the current financial situation is is essential to make decisions based on realistic data, set achievable financial goals and outline effective strategies. That way, you’ll have accurate information to define the direction the business budget should follow.
It is worth noting that this assessment should not be an isolated event, but an ongoing process. In short, regularly monitoring financial indicators allows you to identify trends, make adjustments and adopt corrective measures in a timely manner.
2. Set financial goals
Right after making an accurate diagnosis of the current situation of the business, it’s time to talk about the future and this is a fundamental step for the success of companies when building a business budget. Therefore, it is essential to think about financial goals, with precise amounts and dates.
They serve as guides that guide the financial decisions and actions of the organization. In this way, the goals can cover several aspects, such as increasing revenues, reducing certain expenses, improving profitability or expanding into new markets.
By thinking deeply about the future, you create a sense of direction and purpose for the entire team. As a result, the chances of aligning the team’s efforts to achieve common goals increase.
Financial goals also help with daily decision making. Faced with the need to make financial choices — such as investments, hiring or expansions — the goals serve as criteria for evaluating options and selecting the most appropriate one to achieve the desired results.
In that sense, remember that financial goals should be challenging, yet realistic and measurable. In other words, you’ll be able to track the progress of activities, make adjustments as needed, and celebrate achievements when reaching established milestones.
3. Gather data to build the business budget
At this point, you already have an assessment of the current financial situation of the business and defined goals. Consequently, it is time to move on to the step that involves collecting accurate and reliable information about the finances and operations of the business.
By gathering the necessary data, you get a complete and detailed view of the company. In this way, it is necessary to use various information, such as:
● Income : represent the entry of money into the company’s cash through sales;
● Expenses : are the costs and expenses related to the creation of products/services and maintenance of the organization;
● Investment : involves money invested with the expectation of obtaining a return for the business.
Gathering data like these helps you understand the main pillars of your venture’s finances. Therefore, it is possible to know factors that affect revenues — such as more profitable products or services, market shares that yield good deals, among others.
Also, this information helps to understand where the company’s money is being drained without returns, such as losses and waste. Therefore, it is easier to identify where the main problems are, looking for ways to solve them.
So don’t underestimate the importance of gathering data to build your business budget. This step is critical to ensuring the document is accurate, effective, and targeted to drive your business success.
4. Make a financial projection
After selecting the most relevant data for your company, think again about the future and project it in the short, medium and long term. In this way, you will be able to build the business budget strategically to take the business to the desired financial destination.
When projecting finances, you should analyze available information, such as financial history, market trends, and economic prospects. Based on this, it is possible to complete several steps, such as:
● Estimate future income and expenses;
● Identify risks and opportunities;
● Determine the financial viability of your business.
During the task, consider different scenarios and variables that could impact your finances, such as changes in raw material costs, currency fluctuations or seasonal variations in sales.
Finally, you and your company will be prepared to deal with different situations and management will be able to make strategic decisions based on solid information.