Things you need to know about finance & budget planning
Your budget is one of your most important business tools. A failure in a budget can mean a failure in your business, which is bad news for business owners across the country.
With Statistics Canada finding that 49 percent of new businesses don't make it past their fifth year, the onus is on business owners to educate themselves on how best to keep their businesses lively and give them a good chance of success. A good budget is one way to do that.
So why is a budget so important? And how can you manage yours effectively?
Why your budget matters
Simply put, your budget gives you an overview of your business' real and expected cash flow, income and expenditures.
Your budget helps you to plan for the future, while the real time data you enter in your records will show you where your money is coming from, where it is going, and whether there are any problem areas to take care of. A good budget helps you to keep your goals in sight and see if they are achievable.
Your budget will also give you the knowledge you need to anticipate peak periods and slower periods in your business, allowing you to plan accordingly. So how do you get your budget up to scratch?
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How to manage your budget effectively
Budgeting can be a drag, but with Intuit finding that the biggest regret for small business owners during their first year is not upgrading their financial skills, there has never been a better time to start managing your budget better.
Try out these 5 ways to be an even better budget manager:
- Choose your software carefully - You might find a simple excel spreadsheet works for your business, or you might find your business can benefit from some dedicated budgeting software. Don't just rush in and buy the first glossy software you see - take the time to decide what you really need to keep track of your budget;
- Update and review regularly - Your budget won't be useful if it's months out of date. Set aside specific times to update your budget information and review it carefully, and stick to those times. Review the information you see in front of you - are any departments under-performing? Where is money leaking out? What are your strongest income sources? Use this information to review your business goals, and how your business is running, so you can make changes that will have a positive impact on your business;
- Go for realism not optimism - It might be tempting to predict high sales and low costs, but in the long run being overly optimistic can hurt your business. Be realistic - factor in all your costs, and allow for them to be higher than you expect. Predict your sales, but allow for them to be a bit lower than you expect;
- Look at your costs - It's easy to get caught up in sales and cash flow and forget the bottom line - if your costs are lower, your profit margin will be bigger. Take time to review your costs and see if your business is leaking money through high costs, and what you can do to stop it;
- Respond to changes - Use your budget to respond to changes in your business. If a cost goes up or a client gives you less business, use your budget to see how you can absorb and react to those changes.
Budgeting may seem boring, but it's time well invested in the future of your business.
A realistic and flexible budget can help you to run your business better, maximize your profits, and anticipate what is coming next, keeping you safe from unwanted surprises.
About the author
Tristan Anwyn is an author who writes on subjects as diverse as health, marketing, business, and SEO.
Six issues at the top of tax and finance leaders’ agenda
New Deloitte research reveals that tax leaders are under increasing pressure to add strategic value as companies accelerate business model transformation, from undergoing digital transformations to rethinking their supply chains or investing in green initiatives.
According to Phil Mills, Deloitte Global Tax & Legal Leader, to “truly deliver value to the business, the tax function needs to rethink its resourcing model and transform its technology infrastructure to create capacity and control costs”.
And the good news, according to Mills, is that tax and business leaders have more options at their disposal to achieve this.
Reflecting the insights of global tax and finance executives at global companies, Deloitte’s Tax Operations in Focus study reveals the six issues at the top of tax and finance leaders’ agenda.
Trend 1: Businesses seek more strategic counsel from tax
Companies are being pushed to develop new digital products and distribution channels and accelerate sustainable transformation and this is taking them into uncharted tax territory. Tax leaders say their teams must have the resources and skills to give deeper advisory support on digital business models (65%), supply chain restructuring (49%) and sustainability (48%) over the next two years. This means redrawing the boundaries of what tax professionals focus on, and accelerating adoption of advanced technologies and lower-cost resourcing models to meet compliance requirements and free up time.
According to Joanne Walker, Group Tax Director, BT Group PLC, "There’s still a heavy compliance load today, but the vision for the future would be that much of that falls away, and tax people become subject matter experts who help program the machine, ensure quality control, and redirect their time to advisory activity.”
Trend 2: Tipping point for resourcing models
Business partnering demands in the tax department are on the rise, but 93% of tax leaders say their department’s budget is remaining flat or falling. To ensure that the tax function can redefine itself as a strategic function at the pace that is required, leaders are choosing to move increasing amounts of compliance and reporting to a combination of shared service centers, finance departments, and outsourcing providers that have invested in best-in-class technology.
Trend 3: Digital tax administration is moving faster than expected
in addition to the rising focus of the corporate tax department partnering with their business counterparts, transformative changes to the way companies share tax information with revenue authorities is also creating an imperative to modernize operations at a faster pace. Nine in 10 (92%) respondents say that shifting revenue authority demands on digital tax administration will have a moderate or high impact on tax operations and resources over the next five years—and several heads of tax said the trend is moving faster than expected.
"It’s really stepped up in the last couple of years," says Anna Elphick, VP Tax, Unilever. "Tax authorities don't just want a faster turnaround for compliance but access into a company’s systems. It's not unreasonable to think that in a much shorter time than we expect, compliance will be about companies reviewing a return that's been drafted by the tax authorities."
Trend 4: Data simplification and lower-cost resourcing are top priorities
Tax leaders said that simplifying data management (53%) and moving to lower-cost resourcing models (51%) must be prioritized if tax is to become more proactive at delivering strategic insights to the business. Many tax teams are ensuring that they have a seat at the table as ERP systems are overhauled, which is paying dividends: 56% of those that have introduced NextGen ERP systems are now highly effective at supporting the business with scenario-modeling insights. Only 35% of those with moderate to low use of NextGen ERP systems said the same.
At Stryker, “we automated the source P&L process for transfer pricing which took a huge burden off of the divisions," says David Furgason, Vice President Tax. "Then we created a transfer price database to deposit and retrieve data so we have limited impact on the divisions. We are moving to a single ERP platform which will help us make take the next step with robotics.”
Trend 5: Skillsets are shifting
Embedding a new data infrastructure and redesigning processes are critical for the future tax vision. Tax leaders are aligned — data skills (45%) and technology process experience (43%) are ‘must have’ skills in a tax department of the future, but more traditional tax specialist knowledge also remains key (40%). The trick to success will be in tax leaders facilitating the way these professionals, with their different backgrounds, can work together collectively to unlock lasting value.
Take Infineon Technologies, which formed a VAT technology and governance group "that has the right knowledge about how to change the system to ensure it generates the right reports", according to Matthias Schubert, Global Head of Tax. "Involving them early was key as we took a greenfield approach, so we could think about what the optimal processes would look like and how more intelligent systems could make an impact
Trend 6: 2020 brought productivity improvements
Improved productivity (50%) and accelerating shifts to remote working (48%) were cited as the biggest operational benefits to emerge from COVID-19-driven disruption. But, as 78% of leaders now plan to embed either hybrid or fully remote models in the tax function long term, 34% say maintaining productivity benefits is a top concern. And, as leaders think about building their talent pipeline and strengthening advisory skill sets, 47% say they must prioritize new approaches to talent recognition and career development over the next two years, while 36% say new processes for involving tax in business strategy decisions must be established.