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You may think there is little you can do, but how do you take back control? How do you prepare a budget in an ever-changing business climate and economy?
From start-up businesses to businesses that have been operating for 20-30 years, we should all budget. In addition, we need to constantly monitor our budget against our actuals and reforecast on a regular basis as internal and external forces change.
How many times have you prepared a budget with the best of intentions or because the bank asked you to, but it is filed away in the
top drawer and not looked at until next year due to other demands of the business?
Without a budget, it will be hard to have a successful action plan. It will be harder to look at what changes you need to make to the fundamentals of your business or even identify the key drivers of your business.
Once a budget is set, it is important to not set it in concrete. Businesses need to move away from a “once a year” traditional budget and use their budget as a basis to make more accurate predictions and reforecast it regularly.
Never throw your original budget away; it is as important as you reforecast. Things may change, but it reminds you where you want your organisation to be. You may not have achieved your goals this year due to factors that may or may not have been out of your control. This budget can be the basis for the new year forecast, with business and financial changes incorporated.
Remember a reforecast is still a projection based on the best information available at one time, so you don’t need to update it for every little change.
It doesn’t all have to be bad. You need to plan for the good, the bad and the ugly. The year may start off rough, but it may end better than anticipated.
A budget or reforecast is only as good as the drivers used to create it. Make sure you build it based on the business as it is, the environment the business operates in, and the business owners’ goals.
If you can budget and reforecast successfully, you will have more oversight and control of your business, and better quality information to enable you to succeed.
DISCLAIMER No liability is assumed by Baker Tilly Staples Rodway for any losses suffered by any person relying directly or indirectly upon any article within this website. It is recommended that you consult your advisor before acting on this information.
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