G'day Justin Hogg here from Right Source today talking budgeting again
it's awesome so rocking into that time of year when a lot of people are starting to think about
annual planning or you're just at home, not a lot to do, and you're thinking
about what's gonna happen in the next year and you want to start building a plan
well, what I thought I'd share today is top five things I think should be
included in an annual plan or an annual budget, however you want to think about it
things that may not necessarily have been in front of mind or obvious so
the first thing I always look at doing, always start with, is capacity, so what
does that mean, well when I say capacity I mean the resources that you've got to
run your business so that being your office, your staff,
your funds, basically everything you need to run a business because that is what
will limit you, if you don't have the resources to do what you plan well then
you're not going to achieve it, so understanding the capacity that you need
and also where that capacity sits and the options you've got in that capacity
is very important when starting a plan, in fact it actually frames the whole
work because they're the assumptions that then everything else feeds off so
if you've got one office, you know, 10 employees, a warehouse of X amount of
goods and can hold so many goods, that's, in that capacity is where your plan will
exist so that is very important to start with and understand what it is that
you're working with, the second thing that I focus on is employees, which feeds
from capacity to an extent and then you want to flesh it out more than that so
employees isn't just about bums on seats, it's also about well how much they cost,
understanding the cost that's involved, which isn't just their wage, it's also
training, its support, it's them being able to take leave and what
happens when employees take leave so you need that cross coverage so that people
can actually take leave and that way understanding how the employees will be
managed and form part of that overall capacity within the business. Third thing
is capital expenditure, quite often when people do a budget or they're doing a
plan for the business they're thinking of profit loss, how much money am I gonna
make in the year? And revenue costs that gives me a profit. What sometimes can get
missed from that is when you want to buy something that isn't in your profit & loss
so when you want to buy cars or a new building or more IT support software you
know that type of stuff, sometimes some people include it in their profit and loss
which is fine but sometimes that's excluded because
well that's not, that sits on the balance sheet or however they want to think of it
that's not actually running the business that's buying capacity
so when you go through your budget process always have a step at
the end: well what are the capital or what are the assets do I need to
purchase as part of the business? Number four is tax, this is, sounds a bit
odd because, isn't it, why do I have to worry about tax? It helps build
the expectation so as a business owner if part of what you're looking for your
business is for it to generate a certain return in terms of funding or
supporting the funds that you've put in or just as for a lifestyle, you want it
to deliver a certain return so that you can afford the lifestyle that you're
wanting, tax needs to come out of the return of your business because if you
make a profit you will have to pay tax, so having that tax element in there when
you're deriving your plan for the year at least helps set expectations that
after tax you will have X amount available to either pay out those
dividends to the owners or to reinvest back into the business so that's very
important to be aware of that because it helps set expectations so that at the
end of the year when you're like: hey I've made the made budget, awesome, it
doesn't feel like the tax is robbing you of achieving your target okay
it's about expectations. And lastly and to finish off with a bang
the thing that I would include in any annual plan is a cash flow, so it's all
well and good doing a plan and understanding the revenue and expenses
but you really want a cash flow because that's what ties it all together, a cash
flow will show you how much you have to spend for your capacity, it will show the
timing and when you're putting cash out for your employees, it'll have any other
tax obligations in there and if you have any large capital asset purchases
that'll be in there and it'll show the map of how that's all flowing and most
importantly make sure you've got the cash that sustains that plan so that you
can actually execute it as part of your your overall business plan, so that's it
short and sharp today, five tips on what you should include in your annual plan
if anyone does want any help with annual planning its something that Right Source
does offer and we offer a mentoring process as well so we can help you learn
and grow in terms of that side of your business, otherwise there's definitely
lots of videos on it so you can check them out for free and if you like what you
see please feel free to subscribe and stay tuned for other videos otherwise
it's been Justin Hogg from Right Source, I'll talk to you next week, thanks!