It’s time to get budgeting

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Does the word budgeting fill you with dread? Many of us set out with good intentions of budgeting, but running a private practice means you’re always busy doing something important – whether that’s seeing clients, acquiring new clients or anything in-between that only you can do – so keeping a budget is often one of the to-dos that simply slip away because we don’t have enough time.
Bob Bond at WriteUpp has written a useful blog post about budgeting and has kindly given us permission to re-post it here. Please read on! (or read the original here)
You wouldn’t set sail without knowing your destination… Would you?
Your budget is your rudder. Without it you have no ability to make decisions and/or change the direction of your business. But with it you:
Will have clear understanding of what your year-end result is likely to be.
Will be able to make informed decisions about hiring staff and, should the worst happen, losing them.
Will be able to make informed decisions about investment or rental of new equipment/premises etc.
Will have a mechanism that you can use to perform a simple monthly review to make sure your business is on track or to assess the impact of decisions that you are taking in the business.
Will have a measure of success – everyone loves good news and knowing that you’ve blown your budget can be highly motivating for everyone concerned.
Will have a measure of failure – in my experience the single biggest reason established businesses go under is they fail to identify the warning signs soon enough and consequently don’t take remedial action (cost-cutting) quick enough. If you genuinely have ambitions of running a business with longevity there will be challenges, you will need to make cuts and you’ll come back from them, but only if you act quickly and decisively.
Will have a fighting chance of raising finance and/or debt to fund your business. Without, you won’t stand a chance!
Will be much better positioned if you choose to sell your business at some point in the future. Most acquirers don’t want to spend months trawling through your accounts to verify your historic performance so being able to present your results for each year clearly and coherently will put you in a stronger position.
How do you avoid budgeting being a chore?
The main reason most therapists don’t produce a budget it that they find the process onerous. But it needn’t be. Here at WriteUpp our financial year begins April 1st so we typically begin our planning at the end of February/beginning March which culminates in an annual budget a few weeks before the start of the new financial year. We follow the same tried and tested format every year and so can you! It’s definitely not rocket-science but it works and its pretty well thought out. So, here’s what we do!
First, download the WriteUpp Monthly Review Template.
It’s produced in Google Sheets but you can export it to Excel and use it/copy it freely. Alternatively, just drop us a line and we’ll make it shareable.
In its most basic form it consists of 4 tabs (one green and three red) – we update the green one and we don’t change the reds ones!
Actual v Budget – Here we enter “Actuals” as and when we have produced our monthly management accounts. So typically this is around week 2/3 after the month end. Our accountant prepares monthly accounts for us for a very nominal sum. When we have entered an actual we set the text “bold” and we change the label in Row 2 from Budget to Actual. You can see that we have done this for January with some fictitious numbers. The “Current Month” section on the right-hand side shows performance against budget and the “Expected Out-Turn” shows actuals PLUS budget so that you have a clear idea about where you are likely to end up at year-end.
P&L Budget – Is exactly what it says on the tin and pulls together projected sales with payroll costs and overheads.
Payroll – Here we enter the names of team members along with their associated salaries (which are then uplifted by 10% as an approximation for NI & PAYE). We also enter future recruits and planned departures in here so we have a very clear picture of what our headcount costs will be throughout the year.
Overheads – Here we enter our overheads. We’ve modified this to reflect the likely overheads of a practice, but feel free to use less or more.
Actually producing the budget in this format at the start of the financial year takes maybe a couple of hours and then updating it each month takes perhaps 30 minutes with a further 30 minutes to review it in our monthly review session. It’s not onerous in the slightest and enables us to keep the good ship WriteUpp firmly on course!
Find out more about practice management software WriteUpp here.