Budgeting and Financial Planning Explained

Budgeting and Financial Planning Explained

2023 has certainly been full of surprises. A storm of unexpected events has been brewing this year, whether it be the cryptocurrency crashes or the mass lay-offs occurring across the board.

Regardless of the reason, the fact of the matter is that these are very critical times for businesses. Entrepreneurs must play their cards very wisely to avert disasters from their business’ doorstep and sail through the stormy seas of the current business landscape.

On that note, today we will discuss the importance of business budgeting and financial planning. One of the common features observed throughout the recent events in the business landscape is that they are all decisions motivated by financial motives. The recent mass lay-offs that we discussed in detail in our publication titled “4 Signs That Your Business Needs to Leverage Staff Augmentation” are a great example of even the largest corporations in the world making drastic and life-changing decisions for their employees, and it all boils down to financial management.

Therefore, we at Expertise Accelerated thought it was as good a time as there ever would be to dive into business budgeting and financial planning for our readers and provide a foundational overview of the ins and outs of business budgeting and financial planning.

The budgeting process is a part of the financial planning process. However, for this article we have separated budgeting out as its own subject. While budgeting is a fundamental need of any business, big or small, complete financial planning is a more difficult process that generally lies outside the wheelhouse of start-ups and small businesses. And so, we separated the budgeting portion from business budgeting and financial planning to help fledgling entrepreneurs out there get the information they need without getting too technical, too fast,

What is Budgeting and Why Should You Care About It?

We are sure that nearly everyone that would find this article useful already knows what a budget is, so we won’t belabor the point and instead go straight into talking about budgeting and why it is important to get it done right.

Budgeting is all about trying to account for all future possibilities regarding business expenses, and proactively drawing up a roadmap for the business’ future financial investments. The better you budget, the easier it will be to execute business projects and bolster your business’ growth.

Budgeting is also a great way to keep track of your business’ financial health and growth, as it involves copious amounts of historic data analysis. A good budget is one in which you have clearly defined your goals for a specific period and finalized how many resources will be allocated towards achieving those goals as well as any extra resources that may be required depending on how smoothly everything goes.

When it comes to how one should go about the budgeting process, let’s break it down into steps for easier understanding!

Budgeting for Beginners

1. Forecasting Through Historic and Market Data Analysis

The first step when it comes to budgeting is data analysis. Data is all around us in the business world today, and harnessing the power of data is the only way to achieve business growth today. By combining the business’ historic financial data, such as sales and revenues with data on market trends and consumer activity and interests, businesses can safely chart an estimate of future sales and revenue, which helps draw a map of the business’ upcoming cash flow. This is the foundation for building a budget, as you need to be sure of approximately how much money will be at your disposal and at what time before you can begin allocating it towards various business endeavors.

2. Expense Analysis and Allocation

Now that you know your approximate future cash flow, it’s time to tally up your business costs. Whether it be utilities and amenities, employee salaries, or recurring costs like software subscriptions, throw all of them into the pot and figure out how much cash you will need to keep aside for the business’ everyday functionality.

By figuring out how much money you always need to have to maintain the business, now you can calculate how much extra cash you have available, and begin planning on how to invest that extra capital for business growth. This analysis also helps you identify potential “money sinks” in the business. You may be paying for software you barely use, or your internet service provider may charge you higher than a different one. You can reduce your costs and secure more funds for business growth in all types of ways

This is where we switch to the financial planning part of business budgeting and financial planning. Strap in!

What is Financial Planning and Why Does it Matter?

Now that we have established a quick foundation for business budgeting, financial planning is next on the docket.

Think of financial planning as the name of the overall process of planning the business’s financial future. Financial planning is a complex, multi-stage process involving activities like budgeting, forecasting, cash flow management, risk assessment and mitigation, etc.

Typically, financial planning is something best left to professionals. Budgeting is intuitive enough to be doable as an entrepreneur, but financial planning involves deep knowledge of finance, data analysis, management science, and economics. On top of this, even when looking for accounting and business finance management professionals for your business finance management needs you will need to find someone familiar with your industry and business model for them to be of substantial use to you.

This is the main reason why we do not expect small businesses to be able to fully leverage both business budgeting and financial planning: it’s just too expensive.

Typically, an accounting professional and financial consultant costs over $90,000 annually, according to Glassdoor. Add on relevant industry experience and the salary demand goes up. Pile on top of this the extra office space and other office expenses needed to host such a professional and you’ve got them eating up all the precious money you set aside when you were business budgeting!

We’ll discuss some possible alternative solutions to this problem at the end of this article, so be sure to read till the end!

Now, back on topic, while we do strongly advise entrepreneurs to contact professionals for the job, there is no harm in educating yourself in financial planning enough to where you can navigate your way through a conversation with your accountant and stay on top of things. Remember, there is always someone ready to sell you a bill of goods, so best stay informed and vigilant than blindly trust the first person you see!

Financial Planning for Beginners

1. Setting Goals

Financial planning begins with identifying your goals for the business. After all, you can’t do much planning if you don’t know what you want to achieve. Goals can be anything, whether its increasing revenue, breaking into a new market, launching a new product line, expanding to another location, etc. The point is to have your goals sorted out. Both long-term and short-term goals should be clearly defined at this stage so that you can move on to the next step, budgeting.

2. Budgeting

In case you skipped the budgeting section above, here is a brief rundown:

Budgeting involves assessing your business’ financial data and consumer habits to create an approximation of your future financial performance. By tallying up your business’ costs and using that data in conjunction with your financial forecasts, you can figure out how much money you will have available to invest in business growth and identify areas where you can reduce expenses.

3. Cash Flow Management

After crafting your budget through data analysis of your financial statements, it’s time to get busy and manage your cash flow. Keep a strict eye on your accounts payable and accounts receivable functions, and ensure that the cash flow through the business remains steady. Make sure your payments are all on time, and that you are collecting your debts regularly and enforcing your policies.

All the business budgeting and financial planning in the world is useless if you poorly manage your cash flow, because a negative cash flow throws a wrench into your budget and consequentially on your set business goals. EA publication  “What is Cash Flow, How it Works and How to Manage It?” is a tremendously helpful resource and a good deep dive into cash flow management.


4. Assess Business Capital Requirements

Sometimes, your projected revenue isn’t enough to achieve your business goals. This is where you have to choose: to dial it back when it comes to your business goals or to secure additional funding to achieve the existing goals.

If you decide on the latter, it’s time to start brainstorming how to secure the required funding. It could be through external investors, perhaps applying for government funding via a grant, or a loan. Whatever the method, it’s important to hash it out well before you move on.

5. Risk Assessment and Management

Next comes the matter of risk. While your budget and business forecasts should typically be near the mark, circumstances may arise that are out of your control and can throw your planning into chaos. You must account for such an event occurring, and prepare contingencies for any unexpected interferences.

This can include setting up an e-commerce store, in case there is a repeat of the pandemic, or setting up a reserve cash fund for the business for rainy days. No plan ever goes off without a hitch, so it’s best to be prepared and have contingencies that can dull the fangs of any catastrophe.

Deloitte provides a succinct and informative perspective on financial risk management in their publication titled “Financial risk assessment: The benefits for clients and advisers”

6. Regular Financial Assessment and Plan Modification

You can’t just stop after making the financial plan because the business landscape is very dynamic, especially today where trends shift in hours. You must regularly take stock of your business’ financial performance, and modify your budget and financial forecasts accordingly. Some key metrics to focus on are assets, liquidity, solvency, and efficiency, which can help provide a picture of the business’ financial health.

The modification should also not be limited to just the budget; you need to consistently look for ways to optimize the business and its processes. Business budgeting and financial planning go hand in hand with business process optimization, finding ways to control costs and boosting performance, while planning where to invest those saved costs.

It is also important to be flexible with your goals and try to achieve what you can and not what you want. Fly too close to the sun and your wings may burn off, as they say.

7. Tax Planning

Don’t forget to account for taxes! Uncle Sam always comes to collect, so you better consider the tax implications of your business activities and investments when deciding on your future goals. Taxes are an area where professionals really shine, as they can point out any beneficial tax policies for your business, help you with deductions and comply with state tax regulations.


And there you have it, a short and sweet walkthrough of business budgeting and financial planning. Of course, this is by no means a complete guide to financial planning, as that is something that takes entire textbooks to fully elaborate. However, this should give you enough of a foundation to get started on business budgeting and financial planning with your accountant!

Speaking of which, let’s talk about alternatives to in-house accounting and finance professionals. The best alternatives are outsourcing and staff augmentation services for business finance management.

Expertise Accelerated, for example, is a staff augmentation firm specializing in accounting and finance professionals. If you need help with business budgeting and financial planning, you can simply connect with EA, and our team will connect you to several off-shore, gold-standard remote finance professionals. Whatever your needs be, whether they pertain to a specific industry or business model, you ask and we deliver, all at a fraction of the cost of an in-house counterpart. Offshore outsourcing through remote work is the future of hiring, so get in line first and stay ahead of the competition.