Often the word “budget” seems like a dirty word, or a bit of a task that we often procrastinate on. However, the one thing that we need to do regularly is to review expenses. Now to review expenses, we need to know the context of the purchase.
For example, we might spend X amount on a certain expense this month – but do we ever ask what should that amount we spent have been? This comes back to budgeting for our expenses.
To make better business decisions, we need to have a target (in accounting land, we call this target a “budget”) to aim for, so that we know if we’ve hit that target or not.
Budgeting doesn’t have to be too crazy, but one way to set your first budget is to go through your actual expenses, line by line to identify any expenses that you don’t necessarily need – whether you cancel them or reduce them to get what your future number of that expense item should be. Then you set your target for that expense each month going forward.
The other thing you want to do, based on your total expenses, is to build your weekly “Magic Number” of sales to ensure everyone gets paid. Things to make sure you include in your magic number is:
The goal for budgeting is to ensure everyone gets paid, but also so that we’ve got clarity on how much our weekly sales target needs to be to make that happen.
To learn more about this, you can watch our webinar recording on “Total Financial Control” OR, you can book a strategy call with an Accountant by clicking HERE.
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