Budgeting For Your Business
Budgeting For Your Business
“Your business opportunities improve with the use of a budget, a powerful tool which assists you in achieving your financial goals.”
Introduction:
A well-designed budget helps you:
- Predict income and expenses
- Control cash flow
- Communicate financial goals
As an entrepreneur, you may not have the time or financial expertise to establish guidelines for predicting income and expenses. Our professionals have knowledge in financial and business matters to assist you in developing an effective budget.
Developing a budget for your business on an annual basis allows you to review its overall operations. Budgeting also permits you to identify those factors that are key to the success of your organization. These factors can be monitored closely throughout the year and adjustments can be made for critical elements.
Outline
These are the sections of “Budgeting For Your Business”
- Communicate Expectations
- Anticipate Future Cash Needs
- Monitor Actual Performance
- Enhance Decision-Making
- Research: Evaluate your revenue position
- Research: Understand the cost structure of your business
- Research your competitors’ businesses
- Document and Communicate the Budget
Communicate Expectations
A budget documents your goals and expectations for a given time frame. You may want to share your budget information with people inside your organization and with significant third parties, such as bankers.
Anticipate Future Cash Needs
Cash flow is the life-blood of any business. Budgeting allows you to look at anticipated sources and uses of cash to determine cash needs for the year. These estimates can be helpful in determining if there will be sufficient cash flow for the year’s operations or if additional sources of cash will be needed to attain financial goals.
Monitor Actual Performance
Actual business results most likely will differ from your plan. By comparing actual performance to anticipated performance, you will be able to examine the variances and determine the business factors which caused these differences.
Enhance Decision-Making
The information derived from comparing your budget to actual results will enable you to modify some of the operating elements of your business. In this way, a budget may lead to more practical decision-making.
The process and mechanics of budgeting vary by organization. Generally, budgeting consists of three phases: research, analysis and documentation and communication of the budget. Each stage can provide valuable insights into your business.
Research: Evaluate your revenue position
Who are your customers? Who is your competition? What economic or technological changes are occurring that may affect your revenue? These and many other questions about your market and your position in that market must be addressed. After carefully evaluating these factors, you can establish realistic revenue goals.
Research: Understand the cost structure of your business
To generate desired sales volume, you should recognize the costs involved. What costs are incurred in a year? Which costs are variable and which are fixed regardless of the volume of business activity? Are there unusual, nonrecurring costs which should be anticipated? All costs should be estimated based on the volume of business activity planned.
Research your competitors’ businesses
What markets are your competitors focusing on? How well do you compete with others in your market? What are your competitors’ revenue and costs? How are their cost structures different from yours? Understanding the revenues and costs of other competitors in your market can help provide guidelines for evaluating the reasonableness of your own cost structure.
Document and Communicate the Budget
By itself, the budgeting process is helpful, but many more benefits can be gained by documenting and communicating the final budget. To ensure that your budget is an effective management tool, you must be able to compare budgeted and actual results. For example, a budget that measures sales by type must have a reporting system which provides this financial information.
Creating a useful budget takes time. We can help you make the most of your time by guiding you through the budgeting process and offering you sound advice in setting realistic objectives. Because of our backgrounds and expertise in business matters, we are qualified to conduct a thorough financial examination of your business. We can then work with you to develop a formal budget which meets your financial goals.
Analysis
With the information derived from the research phase and an understanding of your own goals, you can analyze possible revenue and expenses for the next year. After analyzing these alternatives and evaluating the impact of each on the future of your business, you need to decide on one set of revenue and expenses to represent your expectations.
Our Professionals Can Help You:
- Evaluate your marketplace
- Evaluate your company’s cost structure
- Examine the interrelationships of revenue and costs for your type of business
- Compare your company to industry standards
- Focus on the factors which have the most impact on the success of your business
- Prepare and document your budget so it will be a useful management tool
- Develop processes to compare the actual performance of your business to planned performance
- Identify types of new management information which may help you make more informed decisions
Budgeting enables you to visualize the future of your business. Using a budget as a benchmark, you can more readily identify where actual performance differs from planned performance. This insight will lead you to adjust the actions of your organization accordingly.
We hope you found this article about “Budgeting For Your Business” helpful. If you have questions or need expert tax or family office advice that’s refreshingly objective (we never sell investments), please contact us or visit our Family office page or website www.GROCO.com.
To receive our free newsletter, contact us here.
Subscribe our YouTube Channel for more updates.
Alan Olsen, is the Host of the American Dreams Show and the Managing Partner of GROCO.com. GROCO is a premier family office and tax advisory firm located in the San Francisco Bay area serving clients all over the world.
Alan L. Olsen, CPA, Wikipedia Bio
GROCO.com is a proud sponsor of The American Dreams Show.
The American Dreams show was the brainchild of Alan Olsen, CPA, MBA. It was originally created to fill a specific need; often inexperienced entrepreneurs lacked basic information about raising capital and how to successfully start a business.
Alan sincerely wanted to respond to the many requests from aspiring entrepreneurs asking for the information and introductions they needed. But he had to find a way to help in which his venture capital clients and friends would not mind.
The American Dreams show became the solution, first as a radio show and now with YouTube videos as well. Always respectful of interview guest’s time, he’s able to give access to individuals information and inspiration previously inaccessible to the first-time entrepreneurs who need it most.
They can listen to venture capitalists and successful business people explain first-hand, how they got to where they are, how to start a company, how to overcome challenges, how they see the future evolving, opportunities, work-life balance and so much more..
American Dreams discusses many topics from some of the world’s most successful individuals about their secrets to life’s success. Topics from guest have included:
Creating purpose in life / Building a foundation for their life / Solving problems / Finding fulfillment through philanthropy and service / Becoming self-reliant / Enhancing effective leadership / Balancing family and work…
MyPaths.com (Also sponsored by GROCO) provides free access to content and world-class entrepreneurs, influencers and thought leaders’ personal success stories. To help you find your path in life to true, sustainable success & happiness. It’s mission statement:
In an increasingly complex and difficult world, we hope to help you find your personal path in life and build a strong foundation by learning how others found success and happiness. True and sustainable success and happiness are different for each one of us but possible, often despite significant challenges.
Our mission at MyPaths.com is to provide resources and firsthand accounts of how others found their paths in life, so you can do the same.
Seven Signs Your Noncompliance Will Be Considered Willful
Seven Signs Your Noncompliance Will Be Considered Willful There are many ways taxpayers can get the attention of the IRS. Although a lot of people make innocent mistakes when they file their tax returns, there are others who willfully look for ways to skip out on the taxes they owe. The IRS does treat those…
Make Sure Your Heirs Inherit What You Want
Make Sure Your Heirs Inherit What You Want. The saying goes that their only two things that are certain in life: death and taxes. While people can generate endless amounts of money when they’re alive, they can’t live forever and they can’t take that wealth with them when they die. However, they can have a…
Will Taxing the Rich Even More Improve Inequality?
Will Taxing the Rich Even More Improve Inequality? It’s been the cry of democratic lawmakers and many of the less fortunate for years: “We need to tax the wealthy even more.” “The rich have to pay their fair share of taxes, too.” The problem is the rich already pay a huge portion of the country’s…
It Pays to Be Rich for These Five Tax Breaks
It Pays to Be Rich for These Five Tax Breaks Although it’s true that the ultra-wealthy are heavily taxed, and in many cases unfairly, there are also some tax break advantages that favor the upper class more than those in the middle. Let’s take a look at some of these breaks. Most common and first…