Startups and small-scale businesses are the backbone of the economy. These are the places where fast transactions happen everyday and money move fast and liquidated immediately. For any business, no matter how big or small, the most challenging stage is the first year of the business. This is the stage when you realize the biggest responsibility of starting up a business – budget management.
Budget allocation and the challenge of sticking to it
At the start of the year, you and your accounting team allocate the most conservative budget for the whole year. The challenge for the whole team, including the staff and among other uncontrolled factors is how to stick with the budget. The idea is good and the goal seems achievable in theory. However, there is an important thing that most business people fail to do – post budget analysis.
What is post budget analysis?
As the name implies, post budget analysis refer to the act of analyzing the budget after it has been allocated. It can be conducted at the start, middle or end of the year. The purpose of post budget analysis is to determine whether the company allocated the right budget, how it is spent, and what necessary adjustments should be made to make he budget work as flexible as possible.
The objectives of post budget analysis
- To keep your startup business going.One of the main objectives of post budget analysis is to determine how well your budget work and how can you improve it. You should be able to sustain your budget and make the most out of it.
- To allocate your finances correctly.When you set an analyzed budget, you will be able to determine where to spend it, how to spend it and where and when to make cuts.
- To make solid plans for the future.It is not enough to set a budget. Your budget should be able to equip you to plan your future and make it work.
- To make your investments grow. Analyzing your budget allows you to identify a crowd-sourced funding where you can make your money and investments grow. It also allows you to protect your investments.
- To identify tax discounts. When you do your budgeting and analysis, you will be able to foresee financial events like taxes and you will be able to plan for it. You will also be able to avail taxes discounts when you pay promptly.
Layout your post budget analysis
Using Excel or Google sheet, analyze and lay out your post budget. In analyzing and planning, take note of your:
- Cash. This is the amount you have in the bank or any money you lend to a friend you anticipate to pay in the future.
- Investments and properties. These are your assets such as your business building, if you own it, land, your stocks, and the revenue you can get from those in the next quarters.
- Debts. You should be able to identify all your payables, costs and expenses such as staff salary, equipment, rent, and among other things.
- Cash at hand. This represents all your assets less your expenses.