BUDGETING AND FORECASTING
Budgeting is sometimes dismissed as dirty word;
it seems restrictive and limiting in the freedom of entrepreneurs.
But this is a big misunderstanding, because a budget actually gives you peace of mind.
Take the example of equipment breakdown. 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!
Now consider if you would have set some money aside for it. You call in the mechanic, get it fixed and don’t worry about anything. Peace of mind!
Budgets can help you as well in declaring provisions for expenses at the end of the 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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