Financial budgets, underpinned by comprehensive assumptions are a key management tool, no matter what size of business you operate. They can be used to quickly monitor trading performance against budget and identify any issues.
Good quality financial budgets substantiate the business strategy and give confidence to funders and other stakeholders that plans are thought through and credible. Budgets can then be used to underpin the basis of your financial modelling, incorporating:
- annual forecasts on a monthly basis with full profit & loss/cashflow/balance Sheet to assist with medium to long term planning.
- sensitivity analyses to plan for alternative scenarios.
- short-term cashflow forecasts on a rolling basis to monitor performance and cash requirements.
How do I get started?
You will hopefully have seen our articles in the past about the benefits of cloud bookkeeping solutions like Xero and Quickbooks, which AAB are partners with. These are great solutions but only provide a snapshot of your finances based on your actual results. Wouldn’t it be great if these products also provided visibility, in one place, of how the finances of your business may look in the future as well as reporting on your actual results versus budgets?
One of the key benefits of cloud bookkeeping software is that software developers can integrate their products through Application Programming Interface (“API”) links. There are software products on the market like FUTRLI and Spotlight which integrate directly to help clients understand how their business has performed and its future in a timely, flexible and efficient way. One of the key attractions of these products is that, since they can access real time data, it is much easier to update your cashflow projections as they constantly refresh and update based on your current debtors, liabilities and bank balance.
These add-ons also make it easier for us to advise you on where your business is heading, compare actual results with budgets and key performance indicators. They enable you to make informed decisions, based on real-time information, by creating different scenarios and reviewing the impact on your profit and loss, balance sheet and, most importantly, cashflow.
What if I don’t currently use Xero or Quickbooks?
Even if you aren’t a Xero or Quickbooks user, your accountant should still be able to help you produce a financial model, adapted to suit the size and complexity of your business.
For more information please contact Steve Mitchell (firstname.lastname@example.org) or your usual AAB contact.
To find out more about Steve, click here