The Why regarding Business Budgets

The old adage goes something like this – “How do you know if you get there if you don’t know where you are going?”

 Not only is that statement true for much of life, it is also true for your business as well. In today’s constantly changing environment it is not enough to simply record income and the expenses incurred to generate that income. You need a road map, a budget,to help you carry out your business’s objectives and strategies in a systematic and understandable manner as well as then be able to measure those objectives and strategies.

A budget is both a target and a tool. Let us explain. Your budget is target in that it is a plan of action for achieving desired results by estimating income and expenses for some period of time, usually your fiscal year. It is based upon both past results and future forecasts. For example, you’ve hired no new employees and you plan to give your employees a 3% pay increase so you can use last year’s payroll expense to budget what the increase in labor costs equates to, and how it affects your bottom line. A budget can also help set income targets and maintain expense levels.      

Your budget is also a tool.It is a standard for measuring results by comparing actual income and expenses against your estimates. It can also be used as a tool for projecting“what-if” scenarios. And your budget can help you control costs and maintain certain ratios or put limits on spending categories. For example, you might want advertising to not exceed 10% of sales, so you can project available advertising dollars based upon your budgeted sales figures.  

At Solid Rock Accounting Services we can help you know where you are going and help you get there by working with you to come up with a workable budget with reliable data and one that makes sense to you and your business. For more information on the packages and services we offer, please visit our website www.solidrockaccounting.com.

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