As the end of the year approaches, it is important to begin preparing for next year’s budget. The budget process can be overwhelming but starting early and taking things step by step can simplify the process, engage appropriate parties early and allow time to customize as needed.
Budgets allow organizations to optimize the utilization of their resources and ensure financial activity is aligned with the organization’s goals. Budgets also:
- Strengthen internal controls
- Hold organizational leaders accountable for the financial aspects of their departments
- Identify expectations and track progress on a timely basis
- Discover areas that need to be re-evaluated as the year progresses
While having a budget is highly recommended for every organization, creating a budget is not the most intuitive operation. The budgeting process can be long, difficult and confusing. SST Accountants & Consultants suggests following these steps as you begin the budget process for 2023:
- Identify your organization’s short- and long-term goals
- By understanding these goals, you can allocate proper funds and resources to move you closer to each goal.
- Create income projections for the next year
- To allocate funds for various business expenses, you first need to determine your income and cash flow for the period as best as possible.
- Identify your known expenses
- As you’re identifying expenses for this period, it is helpful to look at what you’ve spent in previous years and do your best to project any additional expenses that may arise during the next year.
- Determine your budget surplus or deficit
- Calculating whether you have a budget surplus or deficit will help dictate how to best use additional funds or how to best close the deficit gap.
A proper budget ultimately leads to more effective business operations: resources are appropriately allocated and everyone can be on the same page about upcoming goals. Budgets are a necessity, but they don’t have to be a headache. By following the steps above, the hope is that your organization will be able to create a well-oiled budget and continue to operate seamlessly.
If your organization would like more assistance in the budgeting process, please reach out to the experts at SST Accountants & Consultants for personalized recommendations.