BUDGETING AND FORECASTING
Budgeting is sometimes dismissed like a dirty word – it seems restrictive and limiting the freedom of entrepreneurs. But this is a big misunderstanding, because a budget actually gives you peace of mind.
One area where our industry mostly falls short of having the money, when they need it, is for important repairs. How that hurts when the oven breaks down on a Saturday just before you need to cater for a function of 200 people! Call Out Fee, Saturday Loading – there goes your profit for this month!
But what if you would have a budget for necessary repairs? The hospitality industry has industry specific norms that will not change. Repair & Maintenance will always cost you about the 2 – 3% of your revenue in the long run, however good you maintain your equipment. If you set aside a 2% budget every month for this area, you will be surprised how stress less the next machine break-down will be. The more you R&M budget account grows, the more you are prepared that something will happen soon.
Budgets can help you as well in declaring provisions for expenses at the end of financial year. This means in plain English, if you had a rather good year with no major breakdowns, you can declare a portion of the expected expenses, that you will have next year, as provision. Your equipment will have issues at some point, why not split the expenses between two years and offset your income with it. You will pay less tax this year and reduce your profit, but you can set untaxed money aside for the event of a major breakdown the year after. (This is an example only – it cannot be used as general tax advice. Please contact your tax agent if you are interested in this topic.)
The best part of budgets is that – to a certain degree – you can secure your profit. You don’t have to wait for a Profit & Loss Statement to know how much money you can take out of your business, as long as you keep the budget.
Let us build a budget that is tailored to your business as well as your needs and you will sleep much better at night!
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