BUDGETING YOUR BUSINESS
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BUDGETING FOR YOUR BUSINESS
A business budget is one of the essential tools for properly directing a business. Business budgeting involves forecast sales, expenses and revenue. Not having a budget is the equivalent of getting on any airplane and telling any pilot "Take me anywhere you are going." You're not going to necessarily wind up in a good place -- for your business -- if you don't have a business budget. By understanding the objectives of a business budget, you can more effectively operate your business.
Budgeting helps a company accurately and efficiently plan and track revenues, expenditures, cash flows, capital and investments. Significant financial problems can result without proper control. For example, if the underlying assumptions used to project cash flow are inaccurate, a company may not be able to pay its suppliers or, if it needs to borrow money to make these payments, the cost of capital is greater than if the company had used internally generated funds.
Budgeting helps set priorities. In the case where a company does not have enough money to undertake all of the projects wanted, budgeting helps prioritize how money will be spent For example, if a company is deciding between funding a new market entry, a new product or geographic expansion, budgeting can help to forecast the profitability of each alternative considering such expenses as financing, personnel and marketing. Also in the case there are company needs to reduce expenses, a budget will assist in deciding which expenses should be reduced.
