With end of financial year fast approaching, now is the ideal time to start planning for the new financial year.
While most business owners have a plan for what they want to do with their business over the next 12 months, even if it’s just in their head.
But they rarely turn that plan into a financial plan. This makes it impossible to see what effect your plan could have on your profit and to measure your results to see if you’re on track!
The best way to plan for the new financial year is to calculate your break-even and set your budget, including a sales forecast.
What is break-even?
As a business owner, it’s crucial that you know and understand your break-even point. Your break-even point tells you how much income you need to generate to cover your costs.
By analysing your break-even point you can make informed decisions such as whether the business is financially viable, the selling price of your products or services, whether a new product line will be profitable, or if it would be profitable to expand the size of your operating facility.
By calculating your break-even point, you’ll know exactly what sales you need to generate each day, week, month and year to make a profit and you’ll also know if your business is financially viable.
What is a budget?
So what’s a budget? Simply put, it’s a quantified expectation of income and expenditure for a set period of time.
Budgets are important because they provide a chance to turn your plan into numbers giving you a chance to:
- Set budget on your expenses and look at reducing your fixed costs
- Forecast your sales by product, service or region
- Plan for your team, assets and cash needed for the year
Budgets also help to improve motivation by setting a target to aim for, and help you manage your business better by holding people accountable to achieving the results.
We hope you find the above information useful.
If you need any help with this, we do offer break-even calculation and budget preparation as a service to our clients and we’d be happy to help you too.
Simply call 07 5649 7650 to talk to an expert now.