Strategic Considerations 2017: Next Year’s Budget Planning

The year is coming to a close. There were good times and bad times. Face it – the end of the year is always a challenging time for businesses – it is a look at the past year and forecasting for the next year. Your annual performance should provide the baseline by which to assess your year-over-year performance.

The planning and budgeting process for the coming year sneaks up on all of us, it seems. Most people’s minds are on getting ready for the holidays but as the New Year approaches, it’s time to start thinking about how you want to do things differently next year.

When you are running your business, it’s easy to get bogged down in day-to-day problems and forget about the bigger picture – “The Budget”.

Once your business is operational, it’s essential to plan and tightly manage its financial performance by creating a focus for the direction of your business that provides targets that will help your business grow.

Budgets are about preparing for the expected and putting yourself in position to survive the unexpected.

If unexpected events set you way off course this past year, you should consider building more safeguards into your 2017 budget. Look at your main objectives for the coming year and change or re-establish your longer term planning. This is the time of year to ready your business for the coming year.  Is your team silently putting up with poor or out of date equipment which could actually be affecting their productivity? Even something as simple as new computer keyboards can do wonders for productivity.

As we mentioned – Budgets are about preparing for the expected and putting yourself in a position to survive the unexpected. A capital budget analyzes potential capital expenditures and helps determine where your company should invest their resources. This is vital for success because a company’s growth as well as its ability to stay competitive depends on its ideas for new products, new equipment and new – or improved facilities.

For instance, suppose you want to purchase a new $10,000 large-format color printer for your printing or graphic design company – first off, you would estimate the cost of the capital asset, then get bids from several vendors and come up with a likely total cost for the hardware, software, installation and maintenance.

But wait, there’s more – next you need to estimate the cash flow for the project, including the cost of the asset, working costs for supplies and maintenance, tax deductions for depreciation, a disposal date and a salvage value!

And most importantly – how much extra cash flow will come from the increased capacity of your new printer – and when?

What’s the chance that the new large format color printer will not generate additional revenue until say – Year 3? You should take that into account as you make your decision and recognize the risk inherent in your assumptions.

When doing your “Budget” research – you should also look into the cost of leasing and the benefits of a three year lease.

Equipment leases enable businesses to obtain equipment and machinery that has a high dollar value. This ranges from costly single items like heart monitors and extraction machinery to smaller items needed in bulk like kiosks, software licenses, chiropractic equipment, telephone systems and even coffeemakers.

Equipment leasing is a popular way for businesses of all sizes to affordably keep technology and equipment up to date.

Because most leases do not require a substantial down payment, leasing enables you to hold on to your cash and invest it in other areas of your business. Leasing offers substantially lower monthly payments in comparison to purchasing. But it still has to be factored into your monthly cash flow.

And more good news – Some equipment leases also qualify you for tax credits. Here is a great article that will show you some great tax write offs for Small Business in Canada:

Considering an equipment leases for your business? If you’re looking for information to help you choose the one that’s right for you please contact us today and we will be happy to go through different leasing plans that suit your needs and most importantly – your 2017 Budget!