Imagine you’re about to head off on a big road trip.
You’ve got the car all packed up, you’ve double and triple-checked your to-do list, and you’re positive that you’ve got everything you need for the next few weeks on the road.
Satisfied and excited, you jump in the car, put on your blindfold and start driving.
Wait, hold on a minute! Why would you wear a blindfold while driving a car?
You wouldn’t, would you?
It’s the same with businesses and budgets.
Why wouldn’t you want to give yourself the best chance of success?
In both scenarios, you’re driving completely blind, with no idea where to go or how to get there.
That’s why, in this article, we’re going to show you exactly why you need to put a rock-solid budget or financial forecast in place to help your business navigate the road ahead.
Why not having a budget is so detrimental to your business
Here’s another driving analogy (humour us for a second).
Consider that your business finances are like the fuel or electric charge in your car: it gets you to where you want to be.
Obviously, you want to understand how much fuel or electric charge you need and if you have enough in the tank to make it between petrol/charging stations. You may even decide along the way that you want to check out a new road or destination. So, you need to know if this new location will be ok given the total amount of fuel or charge you have available.
Without a budget, it’s like driving your car without a fuel indicator. Eventually, the car will run out and stop. Or you’ll overfill your car and waste it.
In the same way, if you don’t have a clear understanding of how much you can spend on your business and where you can spend it, you’ll soon find your business in a lot of financial trouble.
It’s difficult to make the right business decisions when you don’t have the numbers to support you – and by numbers, we mean a clear budget or forecast.
Without a budget or forecast, how do you know:
- if your business is on the right track?
- if your short-term plans are supporting your long-term vision?
- if you’re wasting money by heading in the wrong direction?
- if you’re hiring at the right or wrong time?
- if it’s time to celebrate and reward your team for their hard work?
Let’s put all the driving metaphors aside for now and show you a real-world example of how a budget can dramatically change your business.
Budgeting is not simply an allocation tool – it can also offer deep insights into your business
Recently, our Dexterous team worked with a client to build and deliver their first business budget so they could better assign their funds and achieve their business goals.
However, upon receiving their budget, our client also gained access to several additional insights regarding their profit margins that they were previously unaware of.
Reading these insights, they immediately realised that one of their main services was losing money at a significant rate. This led them to drop this service from their business offerings altogether, increasing their profitability.
Similarly, they also realised that they were actually paying bonuses to their team on another service that was also running at a loss when they factored in all costs of sale and an overhead charge. However, rather than drop this service, they decided to increase its price and increase their margins to better fuel their budget and business over time.
So, overall, a great outcome for this client was achieved all from the power of a budget.
Unfortunately, many businesses underestimate the importance of budgeting and forecasting. But as you can see, by creating a budget for this client, we were not only able to help them allocate their finances, but we also helped them make better business decisions that ultimately increased their bottom line and set them on a clearer path for the future.
Business insights through budgets help point you in the right direction
Once you have a budget or forecast in place, the insights that you gather will help you to ensure that you stay on the right track.
Of course, just as important as having a business budget is also making sure that you have specific business goals. When combined, your goals and your budget will help you see what resources you have available so that you can deploy them in the most effective way possible along the way – ultimately allowing you to make better decisions for your business.
So, what can your business do to build a useful budget or forecast that enables you to achieve your goals? Speak to our friendly and knowledgeable team at Dexterous!
Dexterous are the experts in business budgeting and forecasting
Here at Dexterous, we can help your business:
- flesh out your budget
- allocate your resources
- identify your breakeven point
- review the true profitability of your different products or services
- gather the insights you need to make better decisions and achieve greater results.
So, whether you’re looking to expand your business, understand your profitable and loss-making services, realign your focus towards your higher-margin products, or simply gain more clarity over where your money is going, Dexterous has the tools and experience to make that a reality for you.
Do you want help building an effective business budget that allows you to achieve more?
At Dexterous, we go far beyond virtual bookkeeping and external accounting services.
We provide a turnkey managed finance solution that works for you through a financial, operating and growth lens. This means that we leverage all the latest business tools, access global talent and support your financial department with the local expertise of our Sydney team.
We also equip you with a strategic approach and cost-effective function to help you build a business budget and gather valuable insights so you can thrive and achieve more growth in the future.
Reach out to Dexterous and transform your finance department today.