Business Planning / Budgeting – Getting it right
Business planning. This blog is a general discussion on budgeting. At the end is a link to a detailed approach for those interested.The yearly business planning / budgeting process is often dreaded by senior managers in a business. There are so many theories out there about how to prepare a kick ass budget for your business. Invariably at the end of the period actual results achieved are far removed from budget. The entire process is seen as defeating the object of the exercise. This is true for the larger and smaller business. If you are a start-up you may not have a clue of what you can achieve in your business. But you have to start somewhere. So improve your budgeting process as you get to understand your business better.
Budgeting really is the process of focussing the mind. It should get everyone in a business working toward the same goals. It allows you to improve management information leading to better decision making. The budgeting process should start with your sales budget. This will determine what happens in the rest of the business. Business is all about sales. Without sales there is no opportunity to make a profit by controlling costs, or create a sustainable business. You will also need to look at your business environment and economic circumstances when setting your budget. This makes it effective and meaningful.It is important to regularly review your budget to actual performance. Then take corrective action. It’s important to make notes of why things happened the way they did in your actual results. E.g. a change in commodity prices, out of your control, means you have to pay more for your materials then budgeted.
A good accounting software system helps with business planning. It will allow you to input budgets at the beginning of the year. This is great news as you can track your actual performance against your budget. Saving a great deal of time. Cloud accounting software like Xero and Quickbooks have budgeting functionality. They also provide other time saving functions.
If you are interested in a more detailed on Budgeting – read the following link – Detailed guide on budegting
The Association of Chartered Certified Accountants, ACCA, website has a word document on budgeting – ACCA budgeting document
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