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6 Key Steps to Creating a Budget

If you’re a Philly sports fan, you were probably looking forward to 2017 a few months ago. Start looking forward with your new 2017 budget with 6 easy steps. #phillysports #budgetsmart #budgetforsports

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Happy New Year! Can you believe 2016 is over? If you are a Philly sports fan like myself, you were probably already looking forward to 2017 a few months ago. Here are my quick thoughts on each team:

Eagles!

The Eagles finished with a 7-9 record after a blazing 3-0 start. In my opinion, they ended up right where they should have ended up this year. Having both a rookie coach and rookie quarterback is a tough proposition. Carson Wentz looks like the real deal, so we finally have our franchisee quarterback. Moving forward, we just need to keep improving the offensive line, skill position players and solidify the defense and we should be set for years to come.

76ers

Last season was historically terrible. The 76ers did everything in their power to break their own record for the worst season of all time back in the early ‘70s. We were forced to “Trust the Process” another year and we were rewarded with the #1 overall pick of the draft, Ben Simmons. While he is yet to play, Joel Embiid, the #3 overall pick in the 2014 NBA draft, finally returned from 2 straight missed seasons. It was worth the wait as he has quickly become a force at Center. To me he looks like a young Hakeem Olajuwon with more athleticism. With their record currently at 8-24 so far, the only thing to look forward to this year is how Simmons and Embiid will eventually mesh together. Sixer fans should start getting excited!

Phillies

The Phillies ended last year at 71-91 with Phillies fans saying goodbye to the last remaining member of the 2008 World Series team, Ryan Howard. It was good to see some of the young players, such as Maikel Franco, start to blossom into their own. A few weeks ago the Phillies completed a trade for Clay Buchholz from the Red Sox. Although this won’t put us over the top, hopefully this is a sign of bigger acquisitions to come in the upcoming years. Unfortunately, I think we are two to three years away from becoming contenders again.

Flyers

Last year the Flyers unexpectedly made the playoffs. This year they sit in the last playoff spot in the Eastern Conference. With some very good, young defensive prospects the Flyers are building a sustainable foundation for the future. Hopefully, their General Manager (Ron Hextall), agrees and keeps his eye on the future by not trading away these assets.
The future is looking bright for Philadelphia sports but let’s get back to business. For the small business owners out there, I hope you were planning your 2017 budget. If you did not do this, it is imperative to begin the process immediately. I’m sure some of you are thinking “Why would I waste my time with this? I already am doing really well for myself.” My response would be “Are you doing as well as you could be?”. My guess is that if you do not have a budget, then probably not. Think of the budgeting process as your guide to maximize your business’ bottom line and manage your cash flow.

Below are some ideas and tips to get you started if you have never created a budget in the past:
  1. Gather your past two to three years’ monthly financial statements
  2. Take a look at your gross profit, overhead expenses, and bottom line and look for monthly, quarterly and yearly trends. This is important so you can budget and plan for the seasonal times of your business when you are bringing in more revenues and paying more expenses.
  3. Write down all of your sources of revenue and determine how much you earned from each source last year. From here determine what this upcoming years’ revenue streams will look like on a monthly basis by breaking these amounts down into recurring and non-recurring revenues. It is important to stay conservative and not count on non-recurring revenues to repeat themselves in the current year.
  4. Probably the most time-consuming part is to look at your costs. Like your revenues, you will need to determine recurring and non-recurring expenses. Additionally, you will need to think about potential increases to costs such as health insurance, employee hiring, etc. Take some time to think about how and where you want to grow your business and calculate this into your cost budgeting. On the other end of spectrum, try to identify costs that can be cut out or reduced.
  5. If your business is organized as a partnership, you will need to consider taxes that pass-through to your personal tax return. This is a little more complicated this year as there may be a big change to the tax laws. For now, assume the worst case that tax laws will not change for 2017. Therefore, calculate your reserve for taxes based on the current law. You will need to reduce your bottom-line take home pay by the ordinary tax rate, self-employment taxes, and state and local taxes.
  6. Call your accountant. Once you are through this process, take an hour or two discuss what you have come up with from steps 1 through 4 with your CPA. Accounting and taxes probably aren’t on the forefront of your mind. Your CPA will provide you with even more in-depth guidance and thoughts to finalize your budget.
Whether you have never prepared a budget before or you are a seasoned vet, I hope some of the information above is helpful. Regardless, budgeting is vital maximizing the success of your business. As always, please get in touch if you have any questions. Happy budgeting!