As your business marches into this month, the end of the first quarter is the perfect time to evaluate how the budget withstood your actual performance since the beginning of the new year. This checkpoint will allow your business to spring from projections to results and help you establish a precise plan for the rest of the year. March is a pivotal month for running a budget analysis, and we discuss the reasons in the following.

By March 31, your business has produced enough financial data for you to track revenue and cost trends. From this information, you can compare income and expenses to the original forecasted budget to pinpoint any discrepancy or overspending. The figures from Q1 will show what is performing well and what needs attention. Reallocating resources toward what is proving profitable will set a stronger course for success in the next three quarters. 

Financial reports and key performance indicators (KPIs) relevant to your business are the best resources to utilize for a review of the first quarter. Combining data from your profit & loss statement, balance sheet and cash flow statement with KPIs provides a better analysis for budgeting by bringing together high-level financial outcomes (the "what") and operational drivers (the "why"). Compounding data from all sources offers a better explanation of your numbers for alignment of goals with daily operations, highlighting operational inefficiencies and providing early awareness of risks. This overall analysis will aid in planning an accurate budget. Some KPIs you may want to evaluate are:

• Gross Profit Margin
• Net Profit Margin
• Revenue Per Employee
• Average Transaction Value
• Customer Acquisition Cost
• Accounts Receivable Days
• Cash Conversion Cycle

Reviewing your business’s tax situation ahead of tax deadlines will allow time to maximize deductions, minimize tax liability, ensure you’re holding the line with compliance and confirm the year’s tax plan is being followed. Verifying your licenses, insurance policies and compliance documents at this time also reduces the risk of penalties.

If your business requires a major purchase or upgrade, evaluating the cash flow from Q1 will help you forecast costs that will need to be covered in Q2. If cash flow is consistent and there is plenty to maintain operations, you can avoid a financial surprise by scheduling the major expense for a time when the data shows there will be an influx of revenue.

An assessment of your data from Q1 will give you the ability to reset goals put in place at the first of the year. If January goals remain realistic and are on course with your projections, now is the time to position your business for future growth through hiring new employees or making investments. Get situated for success in the last three quarters of the year by completing a performance review and resetting the budget—preparedness leads to profit.