Enterprises encounter multiple revenue sources and expenses throughout the year, and organization is essential for keeping them in check. Annual budgeting is the best way to manage your costs and keep your income in the green.
Working with a third party for the budgeting process can connect you to experienced professionals who employ detailed methods for accuracy. At Compass East, our team provides annual budget services to keep you apprised of your financial situation and prepare you for growth.
What Is an Annual Budget?
An annual budget displays a company’s projected expenses and income over 12 months. These budgets can cover the calendar year or the fiscal year, and they can include cash flow statements and balance sheets in addition to projected expenses.
Annual budget development involves balancing various sources of income against expenses. In a balanced budget, revenues and expenditures are equal. A company is in a deficit when the expenditures are larger than the revenues, and it’s in surplus when revenues are greater than expenses.
Why Is an Annual Budget Important?
An annual budget gives you an overview of your finances before you’re expected to spend, making it a powerful tool for your planning. Budgets are meant to be flexible, but the information you gather from them can be valuable even if your numbers aren’t yet certain.
Your annual budget can reveal areas where you’re overspending. With all of your expenses laid out in front of you, you may notice an excess amount allocated to a specific category. With this knowledge, you redirect funding to a different source.
Seeing this large-scale view of your expenses can also help you pilot new initiatives. When you run a high-growth business, your revenues climb every day, giving you more resources to support your growth. With an understanding of your available funds, you can introduce new categories to your budget and develop your company in new areas.
Annual budgets can even act as a tool for years to follow. Suppose your business anticipates a considerable expense in the coming years — a planned budget lets you account for this loss early on so you can keep your operations in the green even when that money is spent.
Annual Budget Solutions From Compass East
At Compass East, we take a bottom-up approach to developing your annual budget. Rather than looking at revenue goals and working down, we address necessities and work our way up. This method ensures you’re spending on the things you need for a successful business.
When we begin the bottom-up process, we identify the different types of costs in your budget. These include:
- Fixed costs: Expenses that stay the same every month, like rent, insurance and salaries.
- Variable costs: Spending that fluctuates, like the cost of goods, commissions and credit card fees.
- Mixed costs: A combination of fixed and variable costs. In many cases, these expenses have a monthly base fee and additional variable charges.
From there, we create a necessity ranking system to identify the importance of every expense and whether it’s required for operation. During this process, we account for your needs and the perceived value of your vendors and other expenses. This evaluation allows us to tailor the development of your annual budget to your company’s unique qualities.
With the analysis we conduct, our team can create a budget that reflects your goals and requirements. Access to cost forecasting software allows us to make detailed budgets from historical data when your company grows steadily over time. We also support other budgeting solutions to fit your current needs.
The Benefits of a Bottom-up Budget
At Compass East, we set ourselves apart with our bottom-up approach to budgeting. The advantages of this method include:
- Needs-based planning: Our bottom-up method addresses your needs before reaching for goals. Rather than prioritizing unrealistic gains, you keep track of the expenses that are necessary for operation, giving you a firm foundation for developing your business. With needs handled first, you can allocate remaining funds to growth projects.
- Financial expertise: The Compass East team has a diverse background of financial experience that allows us to approach your budgeting needs with confidence and accuracy.
- Ongoing collaboration: When we design your budget, we want you involved in the process. While we handle the processes that require financial expertise, we work with you to understand your priorities and values among your expenses. This collaboration ensures you receive a final budget that you can reference for the next year.
- Finance optimization: You may not understand the power of your revenue until you see it in front of you. Our bottom-up process unlocks your income potential and empowers you to make decisions that support your success.
Annual budget solutions can transform the way you run your business. Use this service alongside other solutions like financial modeling and cash flow management.
Work With a Financial Team You Can Trust
Compass East is your source for scalable financial solutions. We specialize in solutions for high-growth companies with our portfolio of services, and annual budget development is only a fraction of our financial abilities. Our team introduces complete financial solutions with technology implementation, advanced reporting processes and data-based growth initiatives.
Regardless of your industry, we take a custom approach to your unique needs. Our bottom-up technique helps you strategize and build a powerful foundation for growth. With our technology solutions and professional guidance to fill in the gaps, you can truly optimize your finances.
The team at Compass East has a range of backgrounds in auditing, consulting, forecasting, reporting and more. We’re ready to employ our skills for your business development. Rather than hiring an in-house professional for your annual budgeting development needs, turn to Compass East.