Getting a Handle on Budgets

As a numbers nerd, I find budgets super fun and interesting to work on and calculate. As a virtual CFO, I tend to recommend to my clients to create budgets. I do help with this process, but it can be a bit difficult if there is little to no communication. I can create budgets based on historical data, but with budgets you also want to take into account future projections and growth. This can be hard if you aren’t the business owner, since they are the ones with the plans and ideas for the future. So, if you are a business owner and are working with your CFO to create a budget, please be mindful of providing them your plans for the future (this should be a question they ask). A CFO can assist with industry standards and growth percentages, but again having the full picture on a personalized scale is extremely helpful.

Why is a budget so important? To me, I find budgets important because they act as a guideline for the business’s finances. They can help excite the business owner with setting goals and help keep them accountable to their goals by comparing the actual financials to the budget monthly. Budgets are helpful in making smart business decisions, because you will have an idea of incoming and outgoing funds and know about how much you will have to spend. Budgets can also assist with tax planning and creating relatable tax strategies to help lower the potential tax liability based on the projected profits before it is too late at the end of the year.

A budget is not a set in stone report, it is meant to be fluid and flexible with what actually occurs in your business. I would suggest revisiting your budget quarterly to ensure you take into account any new offers or investments you may be planning that you didn’t initially consider. 

When is a good time to create a budget? Ideally before the beginning of the year is the perfect time to create a budget. However, you can work on a budget at any point during the year. You can make daily budgets, weekly budgets, monthly budgets, the frequency is up to you! If you do longer period budgets, like annually, it helps to break it up into smaller chunks while planning to not seem so overwhelming. 

How do you create a budget? I suggest reviewing the last 3 years worth of financials or tax returns to analyze the historical data of what you have actually been recording. This can help you set goals if you expect to grow by 10% or expect to add on a new service. You will have an idea of your fixed overhead costs and average variable expenses, this can help you determine your break even price point to charge for your services and so much more! If you are new to business and don’t yet have historical data to review, it is best to sit down and think about all potential expenses you may have in the year. This will also help you set your price point and give you an idea of how many clients you should strive for. You can also look up industry averages, but know that every business and business owner is different.

Ready to create your own budget? Awesome!! You’ve got this! Looking for a virtual CFO to assist you with your finances?

Fill out my questionnaire here OR Send me an email!

Scroll to Top