Quarter-by-Quarter Business Budget Planning | Pasley

Does Your Business Have the Most Important Planning Tool of the Year?

[Randi Lynn Johnson]: We're back with Brian Werner. If you missed the previous episode, go back and listen — it's the one right before this one. We're talking about all kinds of important things to know for tax write-offs and business expenses. Not going to rehash it, just go re-listen. It's January and, as such, people are thinking to set up the year. Usually you think that last quarter — I've got to buy things to bring the income down. They're thinking ahead, typically, but we have you now, so let's talk about setting up our year. Maybe just each quarter — hey, think about this, plan for this. Can you hit us with it?

[Brian Werner]: Definitely. I would say number one — the most crucial planning tool that any company can have, that a lot of them don't have — is a budget.

[Randi Lynn Johnson]: Yeah.

[Brian Werner]: It's your best projection of what the year is going to look like for you. I tell people: don't spend a ton of time on it, because there are a lot of unknowns over the next 12 months, but at least you have a pulse on it and can say, okay, this is what I project the year to look like. It helps you plan where you're going to invest certain dollars — whether that's business interior design, your marketing and branding, or growing your team. Do you need to add more people? Do you need more office equipment, furniture? These are things companies need to plan for, and without a plan, you're running blind.

[Randi Lynn Johnson]: And if they don't have a plan, can they come to you?

[Brian Werner]: Yes.

[Randi Lynn Johnson]: Can you help them with their budget?

[Brian Werner]: Definitely. I geek out on that — I love it.

[Robin Pasley]: Can they start by just taking all of their categories from the year before and building from that?

[Brian Werner]: Absolutely, yes. Some accounting softwares let you copy last year and start from there, so you're not recreating the wheel.

[Randi Lynn Johnson]: All right, so — start of the year, set our budget. Quarter two?

How Should You Reassess Your Business Budget at Mid-Year?

[Brian Werner]: At that point — mid-year — it's a great opportunity to say, okay, how are things going so far, and what has changed? A budget isn't static. I consider it fluid. There may be changes that impact your organization and affect your budget for the remainder of the year, and that's okay. Make an update around mid-year — maybe revenues are growing faster than expected, maybe a little slower — and make those necessary adjustments so you have a better projection of what the rest of the year looks like.

[Randi Lynn Johnson]: Set the budget, tweak the budget. Quarter three — summertime, we're having a good time. What's happening?

[Brian Werner]: Everybody's having barbecues and working shorter hours, hopefully. But that's a good time to look back and ask: what are we doing that's working, and what's not working? We work with a lot of our companies on what we call investing their dollars. Instead of the word "spend" — which has such a negative connotation — every dollar a business puts out should have a return on investment. So it's a good opportunity to look and see what investments are paying off.

[Brian Werner]: For example: we just invested in a brand new space, it's beautiful, our customers love it, and the business is growing — that's a great investment. But maybe a business has been taking a particular marketing route, hasn't generated any new business from it, and has been sinking dollars into it for six months. It might be time to turn that off and reallocate those dollars in a more meaningful way.

[Randi Lynn Johnson]: Great. Quarter four?

What Should You Be Doing in Q4 to Maximize Year-End Tax Planning?

[Brian Werner]: Quarter four is when everything ramps up and everyone is trying to plan for year-end. From Halloween until the end of the year, a lot of companies are maneuvering. If they have a large bottom line, they're looking to their certified public accountants — their CPAs — to discuss year-end planning. That might mean investing more dollars in office equipment if they have the need, or commercial office interior design upgrades and contract furniture.

[Randi Lynn Johnson]: Tell us some things people typically invest in when they need to balance the books a little more.

[Brian Werner]: Retirement plans is usually a big one. Owners of companies have options when it comes to retirement plans, and some are more lucrative than others — they allow you to put more into your retirement accounts. There are plans like 401(k)s that even allow you to do profit sharing with your employees. That gives owners the ability to keep control of that money while shifting it from company resources into their own retirement accounts. And then there are enhanced plans like defined benefit plans for when there's a lot of income — mo' money, mo' problems.

[Randi Lynn Johnson]: Great song. All right — I'll hit them again because you know I like bullet points. Quarter one: budget — make it, stick to it. Quarter two: see if you're sticking to it, reassess, tweak it if you need. Quarter three: look back — what investments worked? Reallocate where needed. Quarter four: talk to your CPA about how to make investments work for you. Buy that furniture, do the upgrades, do the write-offs.

[Robin Pasley]: And retirement planning — that was a big one. Instead of money sitting in the bank account, put it to work for you or your employees' future. That's great.

[Randi Lynn Johnson]: That is great.