Creating an accurate , workable plan and budget allows a business to get the money it needs from finance, keep track of it with accounting and human resources, and succeed. You can only succeed with a good budget and it will also help the bottom line of any business.
Choosing where to start.
There are two basic starting points for any budget. You can look either at what you did before (historical stats) or what you are planning to do. In the first option you review a prior year or years and then make changes where you think the future will be different from the past. In the second option, you look at a written plan of what you are going to do and ask: ” What will we need to buy”? or “How much money will we have to spend:?. To make a really good budget, it’s best to look at the budget both ways.
The first job is to gather accurate information about the past. This is not always easy. Sometimes records are not kept well. Often, we need to project next year’s budget before this year is over or before the information on this year’s expenses is ready.
Understanding each line.
Preparing a good budget is detail work. You need to do more than say:” I guess we’ll spend the same next year”. You need to know why you spent waht you did and also think about what will change. So, you examine each line and, using your own memory, meetings with others, and reviews of receipts and contracts and understand why you spent what you did.
Predicting the future.
Unless you have a crystal ball, the best way to predict the future is to picture it, meet with people about what they want and what’s happening, and then make an estimated or calculated guess. Your guess will be the best one possible because it’s based on good information, your own experience, careful thinking and accurate calculation. Reasonable and calculated guesses are the best we can do for budgeting.
Reviewing the results.
It is time to ask ourselves some questions before we finish up the budget:
Does it make sense? – For each item, do the numbers look right. Think about the decision you’ve made and then make sure that you comfortable with it. If not, get another opinion or rethink.
Does it add up? – Even if you use a computerized spreadsheet, you’ll want to check you numbers.
Are the big items right? – Pay more attention to the line items with higher figures.
Checking your work.
You need to do more than checking numbers. Capitalization, spelling, punctuation, and grammar are also important. It never hurts to take a few extra minutes to make a document look good with stylish, professional fonts and formatting.
What makes a good budget?
1. It’s written clearly, so that anyone can understand it.
2. It is based on good information from customers and own experience.
3. It is started with last year’s actual expenses, with some planning for the coming year.
4. Research of the most important items and some good management choices i.e buying a old copier.
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