PLANNING AN EFFECTIVE

BUDGET FOR YOUR BUSINESS

By Tiffany M Pope

YOU MAY ASK?

What is a budget?

A budget is a charted course for a business that outlines

plans for the businesses finances.

IN OTHER WORDS…..A Road map to SUCCESS!!!

THERE ARE TWO DIFFERENT TYPES OF BUDGETSSTATIC AND FLEXIBLE

Here is an example of how they work:

TO PLAN AN EFFECTIVE BUDGET THERE ARE A FEW STEPS YOU MUST

TAKE….

1.Develop strategies and goals….make sure your goals are CLEAR, SIMPLE, and

MEASURABLE.

2. Assign a facilitator….a person to distribute schedules, due dates, review numbers, and

consolidate various departments.

3.Distribute schedules to all participants…. This schedule should include due dates and

state completion dates for the budget.

4. Model ad Revenues from the ground up… Revenues should be budgeted on an

account-by-account basis. Helps to be able to understand whether it reflects a shift in

spending or a more negative decrease in spending.

THE ARE BENEFITS TO SETTING A BUDGET!

A budget helps a business navigate through the year

and reduce negative

outcomes.

Helps monitor a businesses

performance

Helps improve decision-making

Increase of staff motivation

Helps Identify problems

before they occur

WHAT AN EFFECTIVE BUDGET SHOULD INCLUDE:

Projecte

d Cash

flow

•Projects your future cash position on a month-by-month basis

•Vital because it pinpoints any difficulties you may be having

Costs

•Three kinds: fixed costs, variable costs, one-off capital costs

•Fixed: rent, rates, salaries, and financing…Variable: raw materials and overtime…One-off capital: computer equipment, any other capital assets.

Revenues

•Based on combination of sales history and how effective you expect the future efforts to be.

•Will enable you to analyze your margins and other key ratios such as your return investment.

DO’S AND DONT’S OF BUDGETING

DO’S D O S E T R E A L I S T I C

G O A L S … Goals that are realistic makes employees want t o attain them.

R E G U L A R LY M O N I T O R F I N A N C E A N D P E R F O R M A N C E … Enables you to concentrate resources on improving profits and reducing unnecessary costs.

P R O V I D E TA R G E T S … U S E P R Y O R Y E A R S

F I G U R E S A S A G U I D E …Collect historical information on sales and costs. Gives you a good indication of likely future sales and costs.

DON’TS D O N ’ T S E T G O A L S T O O

L O O S E LY … Loose goals give the budget too much budget slack and can cause employees to acquire a “spend it or lose it” mentality.

D O N ’ T S E T G O A L S T O O T I G H T LY … Tight goals can cause employees to become discouraged in turn they view goals as unreasonable and unrealistic

D O N ’ T S E T C O N F L I C T I N G G O A L S … Conflicting goals allow for one department to have an increase but another to have a decrease

IN CONCLUSION: EFFECTIVE BUDGETING MEANS…..

MORE MONEY!!! AND SUCCESS FOR YOUR

BUSINESS!!!

DON’T THROW AWAY YOUR PROFITS!

BUDGET THEM AND PROSPER!