Accountant Corner – Planning for 2018
Hello SS Franchise Partners!
As year-end is quickly approaching, many of you will be planning for 2018. Accurate and credible budgeting is one of the fundamental exercises necessary for a business owner to plan both for the upcoming year and laying a sound foundation for business strategic goals for the future.
Did you know that the Plus version of QuickBooks Desktop and QuickBooks Online has a budgeting feature where you can enter your budget and track your actual results throughout the year against your budget? Before entering a budget into QuickBooks however, our recommendation is to first create a budget in Excel as this allows you to easily make changes throughout the process. Once you are comfortable with the established budget, it can be entered into QuickBooks and can then be used to easily view budget versus actual results throughout the year. Click here to view a budget template that includes an example of a Soccer Shots tailored budget. You may also reach out to your preferred accounting provider, Lindsay Young at LYoung@macpas.com for the excel file.
A budget is all about estimates and expectations; therefore, it is key that you have a solid understanding of where the business is heading and what major items could arise in the upcoming year. Within the Excel budget template referenced above, there is a section titled Assumptions and Expectations outlining key questions and items to consider when assembling a realistic budget. Below are some highlights to consider as your review and prepare your budget:
- Revenue assumptions and expectations should be based on enrollments expected for each season, and any changes in the charged registration fee per student.
- When it comes to expenses, we recommend budgeting for your most significant expenses. Some expenses are fixed and are easy to estimate, while others are variable and depend on revenue or other results.
- A variable cost is one that fluctuates based on the Company’s revenue levels. For example, royalties will increase/decrease as your revenue increases/decreases. Other examples of common variable costs include wages, school fees/cuts, and jersey costs.
- Fixed costs on the other hand, stay the same regardless of the Company’s revenue levels. Expenses such as rent, insurance, advertising, and office expenses are some typical examples of fixed costs.
- Because the nature of the Soccer Shots business is seasonal, often revenue (cash) is received at the beginning of the season, while expenses continue for several months after the cash was originally received. Thus, it is also very important to not only manage and review your profit and loss statements, but also analyze your cash flow on an ongoing basis to make sure your cash levels are sufficient to meet your operating needs.
- The income statement tells one story of a Company’s financial health, but cash is critical to funding and managing business operations. A business can be quite profitable, but without adequate cash flow it will ultimately be unable to continue in business in the long term. For this reason, we recommend that the budgeting process also include a cash flow analysis for the year. An example of a very basic cash flow analysis is included at the bottom of the Excel budget template previously referenced.
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