You may be thinking that 2020’s problems are for another day, that you don’t have to start preparing next year’s budget just yet. But you should. Planning your budget this far in advance can significantly impact not only your spending, but your ability to save, make large purchases, travel, invest, expand your business and pay your bills on time.
By having a roadmap to project your income and guide your spending, you can ensure that your small business finances, and/or your personal finances are in order.
Prepare for 2020 By Reviewing Your 2019 Budget
The first step to preparing your 2020 budget is to review your 2019 performance. Before you can plan for the coming year, you should take time to review the challenges and opportunities that the previous year presented. Analyzing the previous year’s budgeted to actual figures, will help you determine where you came short and where you may have wiggle room. Creating a business budget is incredibly important for each year of your business. Having a budget guides the financial decisions you make for your business. A budget that looks at the year before helps determine the paths you can take when it comes to new hires, operational expenses and expansion techniques like marketing.
Project Your Expected Revenue to Prepare for 2020
When it comes to projecting revenue, looking at the profit and loss (P&L) from previous years will help you forecast. You must look at major purchases, seasonal trends, and any dips or boosts in revenue to best inform your projections.
Is there a season during which your business is particularly busy? Is there a specific time of year when sales are low?
Asking yourself these questions will help you with making informed decisions when it comes to planning for the next year.
Plan for 2020 by Including Consistent Expenses
Every year you have some expenses that are the same year over year. Some of these things include payroll, rent, things like state reports, and taxes. While it’s true that these expenses may not always be the exact same amount from year to year, it is important to make sure you include these line items in your budget for the year ahead.
Don’t forget less obvious expenses like monthly membership expenses, gas, professional development courses, shipping, printing etc.
Build In Room for Unexpected Costs to Prep for 2020
Unexpected fees can take a toll on your business budget if you do not build in emergency funds. When planning for next year’s budget, consider what could happen if you had a major equipment malfunction, an unexpected increase in rent or an unusually large tax bill. An equipment malfunction could mean you cannot make a new hire, or it could mean you have to reduce your advertising budget.
There may also be positive things that you want to do that you didn’t consider when creating your future budget. If you have a boost in revenue, you may be able to increase marketing campaigns, add contractors or new employees.
Be sure to review your budget regularly before the year starts and then once a month once the year begins. Make adjustments accordingly, and use the budget to properly pivot and make wise business decisions.
For help managing your business finances, check out our services page. Desnoyers CPA, is an accounting firm that offers a wide range of services for business owners. Check out our monthly blog and join our mailing list to get more information for small business owners seeking experienced financial advice.