5 tips for planning your business’s costs this year

posted by 11 months ago in Tips
5 tips for planning your business's costs this year

Business bank accounts are essential, they are available to all businesses to help control your cash flow. But, before you choose the right bank account for your business you will need to forecast three things; your sales, your costs and your income.

Step one: Draw up a budget

Things to consider:

What are you going to earn?

What are you going to spend?

It is significant to think about draw up a plan regarding this, because without planning you could cause your business to run out of its cash flow and without this your business is unlikely to survive.

Step two: Create a sales forecast

Things to consider:

Quantity of sales

Revenue from the sales

Ideally you should include these factors in your sales forecast for each month going forward, however, you should only do this for the year ahead because the market will change as will the fashion, the consumers and the technology.

Step three: Plan your sales

Things to consider:

Plan how much you’re going to sell

Make room for seasonality

In order to have a sufficient sales forecast, you must estimate the amount of sales you are going to produce, but you must also include changes from seasonality, trends for example; do you sell more over Christmas?

Step Four: Create a cost forecast

Things to consider:

At what point in the year do you spend more?

What are your monthly regular outgoings?

It is important to plan out your costs monthly for example; your sales as the cost is what you are paying out so, it is essential to know what is coming in compared to what is going out of your account. In terms of costs make sure you know the difference between; non-cash costs which will go in the cost plan and cash costs for example new equipment and staff (seasonality might cause you to hire more employees).

Step Five: Create a cash flow forecast

Things to consider:

Invoice payments

In and out payments

Your cash flow forecast is also your most important forecast because it links your sales and your cost forecasts together. For example, you may invoice a partner in May, however, you might not expect the payment until June. You should also include tax payments in your cash forecast, don’t leave this out as it is still money going out of your account.

If you are struggling with late payments from partners, customers and suppliers then invoice finance is available to pull you out of the dark and into the light.

Remember!

Never lose track of how much is in your account, you should always be aware of what’s going in and what is coming out of your account. It may sound obvious but, you must always check your closing bank balance as that will help you work out when you are at a risk of running out of cash. With staff to manage and customers to please there’s no doubt that life as a business owner can get very hectic but having a financial plan in place is a vital tool for keeping on track.

This may seem like a lot of work, but most business bank accounts offer online banking and banking apps which means handling your account is that one step easier!