Do I Need a Budget?

by Roger on October 18, 2012

in Administrative

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Over the years I have been working with a wide variety of businesses, the one thing I’ve noticed that always seems to make or break a business is budgeting. Every one that starts their own enterprise strives to be profitable. Basically, a budget is developed to make an estimation of possible expenditures and income for a specific period of time be it a month, quarter or year. While these are estimates, you can develop a more accurate budget with experience.

Even if it’s a new business, logic goes that you have some experience in the enterprise or at least have done thorough research in the area. Many companies develop long and short term budgets to assist them in marketing strategies and projections as to how many employees will be needed or the inventory level needed. A budget can be a tool to accurately develop a financial forecast used to assist with economic decisions in a best case or worst case scenario. 

Granted, there are a number of unknowns such as supply shortages, decreases in demand or even some type of government regulatory changes. Developing and following a budget can assist in making the unknowns less threatening. There are basically two important functions of budgeting, planning and control. With any new business there are always a number of questions such as utility costs, telephone costs, rent and supplies among the many. Doing your homework prior to developing a budget can help to develop a budget that is realistic, enabling you to forecast what you’re going to need and when.

There are a number of different types of budgets which can be developed such as a fixed budget or a variable budget. Of course many of us think that ” I’m just a small Mom and POP operation” and that developing a budget isn’t needed. This couldn’t be further from the truth. While budgeting can be a complex procedure, many new small businesses can get by with a simple budget. Microsoft has many free excel budgeting templates that can do the job.

As with anything that you do, poor planning almost always means failure. If you’re not sure or don’t understand something, seek the help of a qualified professional. It’s money well spent.

About the Author

Roger

Roger Forte holds an MBA in accounting and has been working with small businesses (and their tax matters) for over 35 years. Mr. Forte is a consultant with Speedy Incorporation and LLC, advising on incorporation and LLC formations. He also serves as the lead blogger on all things relating to accounting for small business on the Speedy Small Business Blog.

 

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