There’s no doubt that 2020 has been a tough year for every kind of business. From sole traders to directors of large companies, the events of the last few months have largely thrown a spanner in the works in regards to everything from sales growth to service diversification.
Whilst each business has unique requirements and goals, there’s an aspect of daily operations that it will share with all others. Namely, the ability for a business owner to create clear budgets and an accurate financial forecast means the difference between surviving and thriving during this difficult period.
Budgeting and forecasting are terms that are often confused with each other, yet they each play a unique and crucial role in ensuring the sustainability of a business. Aaron Gilmore is the owner of TreyBridge Accountants, an accountancy and business advisory company that helps business owners across the UK to take navigate their numbers:
“It’s very easy to mix up budgeting with forecasting because the two processes share the same objective. However, they’re actually very different and come with individual benefits. Budgeting is the fine-tuning of your upcoming financial activity to achieve specific goals. For instance, it could be a case of taking into account your payroll, commercial rent and other expenses in order to decide how much can be spent on training, marketing and networking during the next quarter.
“Forecasting involves the in-depth analysis of all fixed and variable costs, the company’s historical financial status, and the best and worst-case scenarios that could occur over the coming months. This enables the owner to develop a clear picture of where the business was a year ago, where it currently stands, and where it might be in the next twelve months. The result is valuable insight into how costs can be tweaked and activity fine-tuned to achieve maximum results.”
With the economic landscape fluctuating wildly due to the coronavirus pandemic and its regularly updated safety measures, Aaron says that knowing how funds should be allocated in both the short-term and the long-term is imperative:
“Budgeting and forecasting work in unison to empower the business owner in every area of their daily operations. This ranges from recruitment and brand development, to everyday expenses such as travel, petty cash purchases and client entertaining. It’s not a case of scrimping and saving, but rather the thorough understanding of how your finances are used today, tomorrow and over the following months.”
With budgeting and forecasting being more important than ever before, Aaron also says that the more control you have over your business finances, the more effectively you can distribute them:
“A lot of people hear the word ‘budgeting’ and assume it means cutting costs. This doesn’t have to be the case, as a business that respects budgets will find that it has a healthier cash flow which can then be invested in commercial activity. To put it the old-fashioned way, look after the pennies and the pounds will look after themselves.”
Working with sole traders, limited companies, partnerships and start-ups, Aaron invites business owners across the UK to get in touch for free advice on 01482 235575.
