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Creating a feasible budget for your upcoming fiscal yearYour business needs to have a budget in order to keep your expenses under control. Everyone knows that a budget is necessary to keep spending under control and to make accurate predictions about the fiscal year's cash flow, expenses and capital spending. There are three things that must be considered when formulating the upcoming fiscal year's budget: 1) The previous fiscal year's expenditures.
Whenever a business is planning on making a change to the business, such as opening a new store, hiring some new employees, purchasing some new assets, or possibly even buying out a competitor's business, then this is a capital expenditure. Just as when you are buying a home, you may be doing these capital expenditures using borrowed money. Your budget needs to reflect where the earned money is going to go, and how the expenses are going to be paid. You need to have an estimate of what is actually going to take place for the coming year. Again, you can review what has happened the previous year, and make adjustments according to the changes in circumstances. Your organization made a certain amount of dollars last year, but this year your have three new product lines, and market research indicates that sales from these new products will add about 7% more in gross earnings. However, your accountants figure that it will take 3.7% additional funds to make delivery of these new products happen. Of course, no one has a crystal ball to accurately predict the future. But when running a business, you need to come as close to predicting the future as possible. If it's your first year in business, do you still need to have a budget? Yes, but you don't have the previous year's experience to know what to predict. You do have other sources of data, however. You have the cost of leasing your building, the cost of your employee's salaries, and your business plan. You can still come as close to reality as possible. After all, without a budget, your business will amuck and crash into the rocks like a ship without a lighthouse. |
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