We suggest you read through these notes before you begin using Calxa and then slowly work your way through the process of creating your first budget and cashflow forecast. Remember that budgeting is very much like forecasting the weather. You can look at what has happened in the past, consider things you know will happen in the future, and add in things you plan to have happen in the future - but there will always be unexpected events.
The aim of good budgeting is to predict as much as possible, to minimise the unexpected events in the life of your business. If you are unsure of how to get started with your budget we offer some suggestions below but the best advice may come from your accountant or financial advisor. If you have used the same accountants for some time they should have a good knowledge of where your business has been and (hopefully) where you want to take it. If you are feeling confident we encourage you to start putting together your first budget. The actual process of trying to create a budget can give you very useful and valuable insights into your business.
Unless you are an experienced budgeter though, we do encourage you to get your accountant to review your finished work. He or she should be able to give you a more objective view of your business, maybe question some of your assumptions, and advise you of forthcoming legislative or environmental changes that may affect your business. By working together with your accountant you can produce a realistic budget that you can then fine-tune as your experience grows and circumstances change.
What does Calxa do?
Calxa enables you to plan your business finances. It gives you the tools to forecast your income and expenses and predict your likely future cashflows.
In Calxa you will enter your expected Sales, Cost of Sales and Expenses to produce a Profit and Loss budget. This will show you whether you are likely to make a profit in the year you are considering and how much that profit (or loss) is likely to be. In order to predict your cashflow – the movement of money in and out of your business – you will need to also create a Balance Sheet budget. You will need to predict what Assets you will buy (for example a new car or piece of machinery) or dispose of; what changes there will be to your Liabilities (loans you take out or repay, for example) and any Capital (Equity) changes to your business. Once you have entered the budget figures you will then need to predict the cashflows from those budgets. For example you might budget for sales of $10,000 in July. How much of this will you actually receive in July? For many businesses part of this will be received in July, part in August and part in September or even later. There is a similar situation with your expenses – what you purchase in July you may not pay for until August or September. Calxa will help you predict when your money will come in and go out.
We will suggest some useful reports that will help you make the initial estimates and as you review your reports on a regular basis you will be able to fine-tune these estimates. Nothing is cast in stone in Calxa and you can vary your predictions at any time as situations change and as your knowledge and understanding of the processes improves.