Over the past couple weeks, we have been learning Accounting 101 in an effort to better KNOW the NUMBERS. You want to know my favorite part of “knowing the numbers”? It is PLANNING. I love looking at history and making financial plans for the future. I love looking forward, so… for me, the recording of transactions and reviewing of the past only gets exciting when I can forecast and budget. We did a series of posts in December on financial planning. I’m going to paraphrase them here to relate them to our Accounting 101 series. If you’d like to read them entirely, they make for good education.
Knowing your Numbers Step #8: Make a Budget
Budgeting is all about setting goals for your money. Once you know how much you spent in 2009, you can plan for what you want to do in 2010. Here are some questions to ask yourself when reviewing your 2009 expenses:
- Which expenses were too high? How can you adjust these for next year?
- Which areas would you like to spend more money on?
- How can you cut costs? Are there things you don’t need? Items that were wasteful?
- Did you have expenses that caught you by surprise? Can you plan for these in 2010?
- What do you want to do with your money?
After looking at your 2009 expenses, flesh out a plan for 2010. Here is an Excel template to help you build your budget for the new year:
Knowing your Numbers Step #9: Make a Sales Forecast
If you need a refresher on: break-even sales, targeted sales, average sale, and cost vs. expense… see this post where we explain more in depth sales planning. If you’d like a template where you can simply plug in numbers to determine your sales plan and have the opportunity to play with your numbers, we created an easy-peasy download you can use. Sales formulas are already set-up in Excel and will auto-calculate for you. Or, you can of course create your own spreadsheet and play with the numbers that way. Here is our Sales Plan template download available for $10…
Knowing your Numbers Step #10: Plan for Asset Purchases & Debt Repayment
After determining how many sales you are going to make, you’ll be able to determine your net income planned for 2010. What will you do with that money? Will you reinvest it in your business? Will you purchase new equipment? Will you pay off debt? Will you reward yourself and withdraw it for your personal needs? It’s up to you… but incorporate this into your plan. Read more about planning for reinvestment and asset purchases here.
Do you see how powerful this is for making business decisions? What are your thoughts?