Ready for Year End? Part 3 – Budgeting for the New Year

Contrary to popular perception, a budget is not a dose of cold reality to rein in the grand financial goals you have for your GovCon business. Rather, a budget can serve as a roadmap for how to meet those goals. We toast to a prosperous 2023 for our current and future clients with four pieces of budgeting wisdom to help set you on track right now and throughout the year:

1. Round up the right data for the best results.

Budget forecasting uses your business’s existing information and reporting data to construct an annual financial forecast model. Choose a model that can be custom-built for your business. Remember, though, that a forecast can only be as accurate as the information you feed it. If you want the highest quality strategic output, you need quality input:

  • Prepare your sales pipeline and forecast.
  • Estimate your labor costs and labor utilization.
  • Estimate your capital assets and working capital assumptions.
  • Prepare your statement of indirect expenses.
  • Document key business assumptions.
  • Note the timing of awards.

2. Plan in real-time.

A budget forecast model integrates actual results for a continuous year-end outlook. The forecast is a living planning document that creates updates based on the latest known assumptions for new business and award timing. Ideally, your forecasting model will have a performance dashboard that provides you with immediate access to the data you need to turn static information into dynamic key indicators.

3. Let the numbers be your guide.

Your forecast can help take the anxiety and uncertainty out of many aspects of running your business and crafting competitive bids. Here are just a few benefits:

  • You can calculate how your business may change with recent awards and how this will affect key financial indicators for profit, cash flow, indirect rates, and others.
  • You can calculate the indirect rate impact to use for future bidding and to support other business decisions.
  • You can forecast the impact of a business slowdown or delay.
  • You can project your tax position, establish tax goals, and create a strategy to reach them.

4. Rest assured: You can see there from here.

When our clients are ready to reap the benefits of budget forecasting, CAVU uses the Nue Guided Discovery Process within the Nue Financial Forecasting and Scenario Planning System. We chose this system for its ability to gather and analyze results to absorb information more rapidly and use it for informed decision making. The Nue system streamlines the recommendations outlined above into a three-step process: 1) Collect your existing data. 2) Conduct targeted, balanced visualizations using charts and reports to rapidly create a picture of where your business stands and where it is headed based on current numbers. 3) Create and compare various “what if” scenarios to make informed decisions.

The Nue system wields an automatic basis of estimates function to handle bottom-up or top-down budgeting (our recommendation is to use both). When input variables change, the system automatically iterates your forecasts so you can see the full impact. You can save a baseline plan and compare your latest changes to know how you are progressing and take corrective action if needed. The system also has a built-in enterprise value calculator to help you see how your decisions are impacting company value.

If you are ready to sort through the budget forecasting options that match your goals, CAVU’s accounting and financial GovCon experts would be pleased to assist you. Feel free to contact us to welcome 2023 with solid budget planning in place.