Why Physical Measures are important

Doing a P&L Budget is not the end of the process. Where possible non-financial measures such as numbers of sales transactions, numbers of customers, basket size and employee head count should be incorporated in your budgeting process. As I learned throughout my corporate career it is by doing things that we incur expense and generate revenue so by measuring these ‘things’ will we get an early warning as to whether we are deviating from out plan. These physical measures should form part of your P&L Budget.

Once you have compiled your P&L Budget you can turn your attention to your Cash Flow Budget, arguably the most important Budget you will prepare as it will tell you about how solvent your business is. Amongst the questions you will need to answer are:

·??????? Do I have enough Cash Flow to meet my bills as and when they fall due?

·??????? Do I have enough Cash Flow to replace my Plant and Equipment as it wears out or needs to be replaced to increase my productivity?

·??????? Am I collecting my Debtors on time?

·??????? What is my investment in Inventory? Do I have too much or too little stock to meet my forward sales?

Want to know more about my process, check out the link in the first comment or send me a DM.

#FinancialStrategy #SmallBusinessSuccess #BudgetingWisdom #StratPro