Preparing a budget

When preparing an annual budget, a business owner needs to determine the expenses required to reach profit goals for the upcoming year. To maximize profit, expenses must be controlled while optimizing revenue. This requires revising which expenses are necessary and which ones can be reduced. Understanding the relationships between revenue and direct expenses will simplify the process and give the business owner clarity when making decisions which have an impact on the bottom line.

Areas to focus:

• Review historical trends for volume, revenue and pricing

• Review historical trends and correlation between revenue and direct expenses

• Identify if your business is understaffed or overstaffed

• Determine amount of time off hours given to employees and how it impacts the bottom line

• Review direct expenses to determine if you are leaving money on the table