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A 6-Step Guide to Financial Planning and Budgeting for the Rest of the Year

Get ahead of year-end financial chaos with our six-step guide. We'll help you reassess, strategize, and plan your small business finances for a stress-free end of year.
End of Year Budgeting Guide in 6-Steps - Guidant Financial Blog

The end of June marks the halfway point of the year. That means it’s the perfect time for small business owners to reassess their finances and check in with the progress of their year-end goals. Keep reading for a simple, six-step guide to successful budget-planning for the rest of the year — including tips and resources for small business budgeting.

Looking to get ahead of the latest small business trends? Explore highlights and Top Trends and Challenges Facing Small Businesses: Guidant’s Small Business Trends 2023.

6-Step Guide to Successful Small Business Financial Planning & Budgeting

Proper financial planning and budgeting are crucial for any business looking to succeed in the long run. In this blog, we’ll discuss how small businesses can plan to meet their financial goals and maintain a positive cash flow for the second half of the year effectively and stay on top of their financial goals.

1. Gather Your Planning and Budgeting Tools

First, you want to assess what planning and budgeting tools you need for your business. A business’s financial results are generally tracked and forecasted in the following documents.

Income Statement

The income statement contains your revenues, expenses, gains, and losses. It is sometimes referred to as a profit and loss statement. It provides a snapshot of your income and monthly expenses for a given period.

Cash Flow Statement

cash flow statement monitors the movement of cash in and out of the business for a given period.

Balance Sheet

balance sheet containing your assets, liabilities, and shareowners’ equity. It provides a picture of what you own and any debt. Many businesses do these monthly or quarterly, with a final summation for the fiscal year at year-end. You can either produce these yourself, hire staff to do them, or outsource them.

Need a balance sheet? Get started or download a FREE small business balance sheet in How to Make a Balance Sheet in 5 Easy Steps.

2. Create a Record for the First Half of the Year

So how do you plan for the rest of the year? The first step is to create a record for the first six months. If you haven’t yet completed your income statement, cash flow statement, and balance sheet, that’s the first step in planning.

3. Review the First-Half Results

Then, take the time to sit and review your first-half results. The first thing you look at is the bottom line. When businesses fail, it frankly often occurs because they run out of money – either they routinely didn’t make enough to meet expenses or some unforeseen large expense couldn’t be covered.

Review your income statement. If your income and revenue meet your expenses, you have a balanced budget. If your income and revenue exceed your expenses, you have a budget surplus. If your income falls short of your expenses, you have a budget shortfall.

Review your cash flow. Was the movement of cash in and out of the accounts balanced? If so, you have adequate cash flow. If you have a cash flow shortfall, what causes it? If it was temporary or due to seasonal variation, you want to know that for future projections. You also need to come up with a plan to fix the shortfall, either by bringing in more cash or reducing expenses.

Note: If you have cash flow surpluses, it might be a good idea to create a plan for excess cash flow (such as reinvestment in the company, purchases for the company, or just a cash cushion for an emergency fund or fluctuations in expenses or a downturn).

Review your balance sheet. What shape are your assets and liabilities in? If your company has a portfolio of assets, midyear is an ideal time to review its performance. Do you need to make any adjustments? If you have liabilities, how does that affect your company? Is the debt service you’re paying manageable? Are you reducing the liabilities over time?

Ready to improve and streamline your business data? Become an Efficient Data-Driven Business in 5 Steps with this effective guide.

4. Project the Second Half Results

After reviewing the first half of the year, the next step in planning and budgeting is estimating your second-half results, including future income and future expenses. The great part of having a record of your first-half results (and past year results, if you have them) is that you can use them to forecast your numbers.

Break down your expenses by category — the cost of goods sold, staff salaries, marketing expenses, real estate costs, operating expenses, and so on. If you have variable expenses and fixed expenses, factor that in. Break down your income by category as well.

Be sure to think through anything that could affect the forecast. For monthly expenses, think through any monthly budget effects from the macroeconomic climate. Inflation has been high but is starting to moderate a bit. Might your expenses moderate as well? Do you need to raise any expenses from last-year levels to account for inflation’s effects on what you need to purchase?

Other factors in the macroeconomic climate can affect your financial situation as well, including the overall strength of the economy, the ease or difficulty of hiring needed staff, remaining competitive with staff salaries and benefits, consumer confidence, your business’s tax situation, and more.

For income, do the same. Is your client base robust in its demand? Are your customers worried about a recession or likely to spend at the same clip in the coming months as before? Or are they likely to purchase more, given economic trends in your area? If your business is seasonal, do you do more business in the summer or fall, or less?

Make sure your forecasts are realistic. It won’t benefit you or your business to project an overly rosy future because it just means you run the risk of a shortfall between your estimates and your actuals. Once you’ve completed your projections for the next six months, review whether the projections leave you with a balanced budget, a budget surplus, or a budget shortfall.

Need to finance your business — without the stress? See our comprehensive breakdown with strategies you can use today in How to Finance Your Small Business.

5. Consider Your Strategic Goals and Vision for the Company

Part of your projections need to consider your strategic goals and your vision for the company. It’s a good idea to have both short-term goals (from one to three years) and long-term goals (up to 10 or more). Review your relevant goals and then consider how your current financial picture and projections impact them.

If you have a budget surplus in both the first six months of the year and in your projections, you’re ideally situated to make a plan for the achievement of your goals. Business goals can range widely — expanding your geographic locations, expanding your product line, changing your marketing, hiring more staff, establishing a cash cushion, obtaining financing, issuing stock, purchasing capital equipment or real estate, and more. A surplus can be used for a wide variety of goals:

  • If you move toward goal fulfillment, make sure it’s in line with your overall vision for the company.
  • If you have a balanced budget, you can also consider how you can realize your goals and vision. If you need increased income to do so, can your business accomplish that by raising prices or increasing production (or cutting expenses)?
  • If you have a budget shortfall, you may need to modify your goals and vision. Your first priority is to stop the red ink on your financial statements to ensure the continuation of your business! To do so, you need to review both your results and your projections with an eye to how to stop the shortfall.

Essentially, you must raise your business’s income, lower expenses, or both. Review the best ways to do both. Can you raise the price of your products or services? Can you reduce or eliminate expenses by signing more advantageous contracts for your raw materials, lessening your real estate expenses, or foregoing new purchases? Can you refinance a loan or pay down debt to reduce your debt service?

One cautionary note: if you have a cash cushion, it may be tempting to draw on cash to balance a budget with a shortfall. That may not be prudent. Your business needs to be solvent on an ongoing basis, with a match between the income you can reasonably bring in and your expenses. A one-time fix that draws down your cash simply leaves you more vulnerable to future shortfalls. It’s the shortfall and the reasons for it that need to be addressed.

It also may be tempting to seek to access a line of credit or financing such as a loan. Again, that may not be the most prudent solution. Credit and financing can be an excellent tool for businesspeople on a firm financing footing as a way to expand or purchase needed supplies or services. But credit and financing need to be repaid. If you have a budget shortfall, debt could worsen your problem over the long term, not fix it.

In addition, most lenders carefully scrutinize your financial statements. You may not qualify for financing or credit until you can show a balanced budget or a budget surplus regularly.

Do you know the value of your business? When are business valuations useful? Learn more in Business Valuations: When and Why?

6. Create Your Budgeting Playbook

Ultimately, budgeting and planning using the methods outlined here create a playbook for a healthy business that can stay in business and realize your goals and vision.

Worried about payroll? Here’s How to Streamline Your Business and Save Time with Payroll as a small business owner.

Guidant Financial Helps Small Business Plans Succeed

Guidant Financial can help the growth of your business. We can guide and mentor you in Small Business Administration (SBA) and other loans and alternative funding methods, such as Rollovers for Business Startups (ROBS), which leave you debt-free. If you need to amplify areas of your business, such as accounting and bookkeeping, we can advise on reasonably priced solutions or outsourcing.

Call us today at 425-289-3200 for a free, no-pressure business consultation to get started — or pre-qualify in minutes for business financing now!


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