The New Financial Year is Approaching, can you stick to your budget! Read on…
To have a smooth financial proceeding in the coming year the first step is to have a perfect budget. This seemingly simple, yet powerful, exercise can be crucial in achieving your financial goals i.e. acquire assets or staying debt-free, and focusing on growth. Whereas so many companies find it hard to stick to budget consistently in the long run, here are some steps that can help you to maintain discipline and ensure compliance.
Have clear goals
An easy way to justify the spending is that you have a lot of money lying in your bank account and you may not need it immediately. If you identify your goals and calculate how much you will need to save every month to reach, be it your next expansion or next big acquisition it will hard to use that money on other dispensable stuff. Thus, the first key is to Identify all your goals, however big or small, and fix the goal values by taking into account the inflation. It will be easy to resist the temptation if you know you are jeopardizing your own company’s future.
Make it realistic
Don’t think of a budget as the magic wand that will instantly take away all your money woes. For e.g. If you think you can suddenly start saving from your pre-decided lavish spending when you have been an impulsive spender all your life, you will be disappointed. Similarly, don’t expect to save a large amount if you have low income and all your spending is on needs and not wants. Initially, you must track expenses for few months then set the realistic targets you need to cut.
Discipline your spending
Many times, income is received at the start of the financial year, however, the expenses are staggered throughout the year. Big spenders find it especially hard to stick to a budget because they are unable to control the cash outgo. One suggestion is to have a recurring deposit type savings account where a fixed amount is transferred every month without the user deciding on its whims. Once the money is out of the bank it becomes difficult to spend.
Ensure your budget is dynamic
A budget that does foresee a change with changes in real circumstances would become a static budget. The altered circumstances and life stages of the organization require a dynamic approach. Higher revenue growth could mean you could save for an additional goal that was beyond your reach earlier. The dynamic circumstances could be positive as well as negatives which one needs to be prepared for examples can be: It could be an unexpected penalty from the government OR a fantastic new product to market it.
Give some leisure to yourself
One of the biggest stumbling blocks while trying to stick to a budget is dealing with eventualities for which you have made no monetary provision. So, if your office/factory requires urgent repairs which you may not have provided can upset your budget. The key is to ensure all small and big expense prospects are decided upon.
Track and keep records accurately
You may create a budget enthusiastically but are you putting in work to maintain it accurately? If you are not tracking every spend or forget to get recorded it rigorously then you will not get the correct picture which can result in wrong decisions or the setting of unachievable goals. The key here is to use the planning and tracking feature available in software like TallyPrime. Fix up a specified time periodically (Weekly or monthly once) and review where exactly are you standing in terms of your goal. You will get the respect of budgeting exercise only if you inspect rigorously.
Include all your stakeholders
If your seniors and the team are either unaware or not kept in the loop of your plans or refuse to go along and heed to the demands of the budget, it will be impossible to work. If you are saving and your senior team cannot resist the urge to spend big expenses or employees keep on insisting on peer company spending styles then you alone will not be able to sustain it. The key here is to solicit cooperation from all stakeholders in preparation and confirmation of budgetary allocations.
Do not forget to have an emergency fund
A plan for Emergencies must be maintained and ensure about 2 to 3 months of cash expenses are available in liquid assets. These small and yet important steps would ensure a perfect financial year 21-22.
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