Monthly Budgeting and Planning
Monthly Budgeting and Planning. To make a real difference in your business you should focus on a monthly budget for planning. You should take the annual budget and divide into 12 monthly periods. You will then, have a comparison point for prior months and your year over year monthly budgets. This will give you the roadmap and planning tools to mitigate costs show weakness and find opportunities to grow your business.
I highly advise reviewing your monthly comparisons of budget in order to create a plan. This should be done after your bank reconciliations are done each month.
One major reason I review my budget on a monthly basis is to look for cost savings. I like to see based on sales as a percentage if my costs are increasing or decreasing. Also I like to see if my sales and costs are increasing or decreasing versus last years period of the same month and is there a seasonality affect in my business.
When I do review my costs I try to find redundancies or costs that really aren’t adding to my profit. Our goal is to increase sales and keep cost in line or lower them overtime. Measuring profit margin month over month and year over year, is a great tool to understand if your business is moving forward we’re going backwards.
Doing cash flow budgeting on a monthly basis is also highly recommended process. Understanding the time when you will breakeven and start to make profit is critical. Knowing what level of sales you need to attain to maintain your costs is imperative.
Once you have a handle on breakeven and costs compared to sales, you can plan for growth. Understanding how you can grow your sales with keeping overhead steady and only increasing variable costs is a great way to start.
Sales growth while lowering costs would be the ultimate path to profitability.