However, you can use historical data to help you predict future sales. Forecasting Salesįorecasting sales income is the trickiest part of budgeting, because sales are something you have little control over. You can begin the process with your strategic plan and your historical data, but then you will need to “juggle” the numbers to work out what is realistically feasible. Preparing a budget inevitably becomes a what-if modeling exercise. Where to Beginĭo you begin the budgeting process with your forecast income? Or do you forecast your expenses first and then calculate the sales you will need to meet those costs? The truth is that when you are preparing a budget for a small business, it will be a combination of these two approaches. You may wish to set high-level objectives yourself, but it would be better to delegate the detailed budgeting to the heads of departments. You will get a more realistic budget if you involve members of your team in the budgeting process, and a team that has been involved in the preparation of any target will be more committed to achieving the forecast result. These are the high-level goals that you will now go on to quantify in your budget. You might have plans to move to new premises, release a new product, or invest in new technology. ![]() Your business goals might be to increase sales by 20% or take on more employees in the coming year. It would be advisable to set your overall business goals before you sit down and begin the number-crunching budgeting exercise. Here are ten tips to help you get more out of your budgeting and forecasting. You need to take a slightly more scientific approach than that. So, taking last year’s actuals and adding ten percent for good measure is not the way to prepare your annual budget. A business budget is an estimate and a guide to the general direction you expect the company to travel. ![]() But a budget should not be viewed as the route your business must follow. Some people believe that a budget should be like a road map, and then they lose faith in the budgeting process when they see that the figures that took so long to prepare look nothing like the actual results. It is your budget that will guide your purchasing decisions in the coming twelve months, and your budgeted figures will provide the data that you need to prepare your cash flow forecast. Your budget will tell you if you can afford the equipment you plan to buy. But budgeting and forecasting is an integral part of the business planning process. Preparing the annual budget for a business is often thought of as being a standalone exercise, and it is possibly one of the least popular tasks for business owners. Improve Your Cash Flow with Proper Budgeting
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