Why Is it Important to Have Monthly & Quarterly Fiscal Budget Reports?
Successful small-business owners use monthly and quarterly fiscal budget reports to ensure the company is on track with its goals of controlling expenses and maximizing potential profits. Any of several circumstances can send a small business off course. You can detect these conditions by examining the fiscal reports and comparing them with your business plan.
Small-business owners who monitor revenues through the monthly report can take steps to curtail a poorly performing product or investment. While a sales report might indicate glowing numbers, if revenues are down, then profits are adversely affected. The monthly business report alerts management to a change in revenues. The quarterly fiscal budget report shows when a new upward or downward trend is occurring.
While you can estimate research and development costs and allocate that amount of money, the actual process might run into unforeseen design adjustments once testing is underway. If these changes increase the cost of development significantly, called project scope creep, then the company might not make the expected amount of profit. The monthly report reflects the amount of money spent on the current project phase, while quarterly reports enable management to compare month-to-month expenditures.
Overhead is the non-production expense of running your business. It includes management and office payroll, advertising, office rent and utilities, membership fees, travel to conventions, etc. Your products must be competitively priced to gain market share, yet they also must earn a profit for the company while absorbing overhead costs. Use the monthly fiscal report to ensure that overhead does not go over the allocated amount. Use quarterly reports to notice any upward trends in this category.
Ledger errors include charging an expense to an incorrect account or neglecting to enter an expense or revenue. You can correct an incorrect ledger entry by following the audit trail back to the original transaction. Monthly and quarterly fiscal budget reports assist you in detecting ledger errors.
Capital is the amount of ready cash to pay the bills for the next 90 days. Every small business should calculate its capital monthly. This can prevent embarrassing and potentially damaging situations, such as not having enough money to make payroll, pay a major supplier's invoice promptly or pay quarterly taxes to the IRS.
Marketing campaigns might run for an entire season, such as sports retailers advertising football-related items from September through the Super Bowl. The monthly fiscal reports provide a narrow snapshot of a particular month, guiding small-business owners on when to spend the most dollars on marketing their products. Quarterly reports give you the larger picture to gauge the success of your marketing campaign. This enables you to rinse and repeat a successful experience or make changes when planning the next campaign.
Inventory is a major expense for small-business owners. You need enough to meet current demand but not so much that it sits on the shelf, possibly becoming useless if you discontinue a line of products. Unused inventory cuts into profits. If sales of a particular item are down, then check the monthly report to ensure a corresponding reduction in the amount of money spent on inventory.