In determining the total revenue the budgeting exercise can take on a rather stressful state if this is not done in a factual and clear manner. Having a clear picture, statistically, of the revenue expected and the revenue streams where the identification of the ways the business entity if going to make money will contribute to the actual business engine’s financial status.

This form of budgeting is important in ensuring the business entity does not project unrealistic revenue earnings that will eventually fall short of the expectations. The expenses which usually fall into three separate categories such as the semi-variables, fixed costs and the variables are also usually considered in the budgeting exercise.

All these calculations are done on the monthly ratio which the business progress dictates. This is the most detailed section of the business engine and usually also required the most attention when it comes to managing the costing elements. The profits meant to be derived are usually the reasons why the business endeavor is being taken on in the first place, thus the basic profits calculated are also part of the budgeting process.

Successful business entities calculate the monthly budgets and make the necessary adjustments accordingly to ensure optimum profit making probabilities. Calculations for budgeting purposes can also be done on a daily, weekly or monthly basis depending on the individual business requirements and style.

Steps to better business budgeting

Without proper budgeting techniques in place, the business entity runs the risk of not being able to get a handle on the financing aspects, thus creating a lot of eventual complicating scenarios which become a nightmare for the business. Being able to accurately estimate the expenses and revenues expected is important to any business entity as it is one of the ways to ensure the proper finances are available at any given time to enable the business to run smoothly.

The following are some tips on how to ensure the budgeting exercise for the business in on track and effective: Checking industry standards and sentiments of the time is something that needs to be done periodically as the percentages of revenue earning possibilities is often affected by the market behaviors. The smaller the business entity, the more likely it is to be effected by the volatility of the market, and this is especially so when there is a downturn in the economy.

Designing an accurate spreadsheet is another essential element that should be included as part of the budgeting exercise. Making clear estimates on the revenue amounts expected against the percentages allocated toward tools and materials relevant to the business will give a clear overview of expected expenses incurred.

Factoring some degree of slack and avenues to cut cost can also be clearly reflected in a comprehensive budgeting exercise. Understanding that there is bound to be a lot of movement within the economy that will eventually have some bearing on the business entity and then taking the necessary financial step to limit its liability will help to keep the budgeting exercise more realistic. Ideally this will also provide better for better cost cutting exercises that can positively contribute to the overall success of the business.

How and what to consider when preparing a business plan and budget

All businesses at some point or another have to consider the preparing of a business plan and budgeting exercise for its key contribution of the success and smooth running of the business engine. There are many elements to consider in such an exercise and the following are just some of the more necessary considerations recommended: Business plans and budgeting exercises are designed to give those involved in the business a fairly accurate and current assessment of the business and its future intended direction.

The plans will also ensure the relevant information is available to assist in the business growth based on the funds available. Such information is essential to the business, especially if there is a need to secure financing facilities such as overdraft tools and bank loans or venture capital funding. The business budget should ideally be the most accurate form of documentation available for the continuous reviewing of the business environment against the actual performance the business is running at.

Most of the budgeting exercises reflect information on a monthly, quarterly, half yearly and annual basis. Focus should be given to area such as the reviewing of the current year’s progress based on the decisions that brought about the present positioning of the business entity. All objectives and strategies that are in place or projected to be so through the action plans and benchmarks it is measured against.

Resources should also be considered for its consistency and reliability, as these elements can and usually do effect the business in some way or another when problems arise. The anticipated results are also something to be considered as it may require changes to be made is such anticipations take on a negative form. Therefore on several different levels the benefits are evident when there is proper planning stages set up in the form of business plans and budgets.

The ins and outs of corporate budgeting

Corporate budgeting is important to any business entity where the financial position of the company dictates the strategies, motivations and achievements that are to be chosen. The following are some of the issues that most corporate budgeting exercises encompass:

The designing of the budget and then the processes involved in informing the various levels within the company structure which may include all subsidiaries and linked business units. It also provides the clarity and consistence, though in quite general terms regarding procedures, responsibilities and time lines that would have direct connections to the corporate budgeting exercise.

With the corporate budgeting in place there is a definition of strategy success factors and organizational performances indicators in place that can better gauge the overall condition of the company’s performance. The methodology used can also be assisted using the relevant software, especially when implementing budgeting software. There is also the possibility of being able to have follow-up process added into the general outline to analyze and variances that may be evident.

Excerpted from the book Better Business Budget Planning.

This excerpt has been edited and condensed for clarity.

Download this book on Boostlane:

https://boostlane.com/p/boostlane/314/better-business-budget-planning/