Business budgeting is simply outlining the expenses and revenues for your business. However in practice it’s much more difficult and complicated to prepare than it sounds. Budgeting is to consider the money you have and you might earn, and the expenses you have to make and that you might wish to make in way of achieving growth. Business budgeting allows you to keep track of your resources, evaluate the financial performance of your company, as well as plan on future growth or investments.
If you skip on business budgeting – a task that is undoubtedly tedious and difficult – chances are that you will not be in complete control of your short term and long term goals. You will also be without a proper financial roadmap to guide you on how to proceed with your business, and possibly even how to deal with day today financial management. This article is written with the aim of starting you out on preparing your business budget, and we are going to start with what questions you need to ask yourself and your employees while preparing your next budget. We’ll start with a tip.
Let an Outsourcing Company do it for you!
There are questions to ask and answers to ponder, but like any other business segment, especially that is a mix of skill, strategy, and experience, you will have to make dozens of budgets to fully comprehend the details. There are several angles to the operations of any company that might be crucial to your business budgets but you might overlook them as auxiliary activities. A BPO company however is likely to have experienced and qualified professionals who will not only prepare your budget for you but will also guide you on how to utilize them to maximum benefits for your company.
What changes you wish to make to your business?
Now let’s move to the questions you should ask or you should tell your BPO partner to ask while preparing your budget. The first thing to outline is what goals you wish to achieve from the budget. Are you planning on expanding operations, launching a new product, entering a new market, or simply aiming to improve efficiency or productivity? The reason behind this is that every different goal would require you to approach your budget from a different angle. For example an expansion plan would require more money to be earned and saved, while an efficiency goal would require cost cuttings and savings on overheads.
What contingency plans should you have?
Have you heard the line “prepare for the worst and then hope for the best”. You cannot aim to make 200% revenues and then just sleep over it. You need to go after your goals and go through your business with a fine toothed comb to identify any areas that can put a barrier in your way of achieving those goals. Let’s say you are planning to open a new showroom, or to move to a more populated and expensive area. You have the money to pay the rent for the new place too. But what if an unexpected cost arises? Some new laws get passed, the prices of the desired real estate shoot up or anything unexpected that puts a damp on your affordability. In such cases, when you exceed your planned budget spending, try to get finances from external resources instead of pulling back on all the work you have already done. Of course if the unexpected cost rise is likely to be a permanent matter, then you will have to roll back on your expansion plans. But either way you will not know the best course of action unless you prepare a budget first.
Should you choose technology for budgeting or human judgment?
The answer to this question is complicated, and depends entirely on your answers to the previous two questions. If you are going for mechanical growth, meaning you are deliberating updating machinery to improve efficiency, then of course an automated calculation will give you a perfectly good idea on how to budget for productivity. However, if your possible contingencies include the risk of an earthquake because of the geographical location of your next site, you will want a real person making the decisions and taking calculated risks. The best way would be to use a mix of both software and creative strategizing while making a business budget.
What segments from your business should take a lead in your budget?
Once you have decided on the final goals, made contingency plans on ensuring against any disruptions in those plans, and have taken help from qualified professionals as well as money managing technology, the final part left for you is to decide on the tiny details of what and what not to include in the business budget. Usual factors that go into a budget are cash flows, sales and cost of sales, marketing campaigns, any bad debts, and employee turnover. You cannot plan ahead without knowing your liquidity position, grip on the market and somewhat certainty of the money you will make, and reliability of the people you depend on for the continuity of your business.
If you have any more concerns about preparing a business budget, Intersoft BPO is here to help!