What Has Your Accountant Done For You Lately?

Danger Lurks In Your Inventory

Inventory has a way of growing like Topsy. The justification is usually that ‘if we don’t have it we can’t sell it’, so a connection is made that translates as ‘the bigger the inventory we have, the more sales we’ll make’. If only it were so.

Carrying an unnecessary amount of stock can be a dangerous thing. If it’s not properly managed it becomes the equivalent of money that’s depreciating at an increasing rate and can actually drop below zero value. Be aware of the danger and don’t let this situation develop.
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Budgeting – Putting Your Business Plan Into Figures

The idea of working to a budget is foreign to most SME owners – that’s something that bigger companies do. Maybe they'll need to develop one when their business grows but meanwhile it’s altogether too time consuming and would keep them away from the ‘real’ work. That thinking may need a little revision. The fact is, businesses that don’t operate to a budget are unlikely to grow.

Business owners who take the approach that budgeting isn’t for them can be seen plugging away week by week and month to month working out what they need to do with their revenue as it comes in to meet immediate needs: is it a pay period?; will it cover the electricity account?; is more inventory needed?

In developing a budget for your business you reverse this approach and take some control over the whole process. Instead of working with whatever amount happens to come in each month you start with planning, for the year ahead, just how much it will cost to run the business. Then estimate how much revenue will need to be generated through sales in order to cover those costs, pay you a salary, and still have a bit of profit left over. A budget has been described as a business plan expressed in numbers. At its simplest it looks like this:
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