According to the Practical Accountancy Loose Leaf, a financial budget is a financial plan for a future month, quarter, year or any other period. Essentially, it depends on what you'll use the financial budget for.
But you can ONLY plan for the future, stay in control of costs and make better financial and business decisions if you use your company's financial budget efficiently.
Use these seven tips to get the most out of your company's financial budget
#1: Have a goal. For example, Company ABC wants to increase profits to R250 000.
#2: Start with a template so you don't have to reinvent the wheel every time. The template will help you make sure you don't leave something out.
#3: Learn from prior experience and build it into the budget. For instance, if you know from prior experience that machines break down at the most inconvenient times, build in some money for emergency repairs.
#4: Prepare for emergencies. Situations where machines break down and where suppliers deliver late are prone to happen. Your budget must make sure you're prepared for these conditions and the costs that go with them.
#5: Make your financial budget specific to your business. For instance, if you're an accountant and your only stock is a few paperclips, don't waste time planning for stock levels.
#6: Stay motivated. 'There are going to be times when you fall behind the budget or lose interest for other reasons. Remember why you did the budget in the first place and keep going,' advises the Practical Accountancy Loose Leaf.
#7: Look at your budget often, react and revise if necessary. Remember that economic conditions change and prices increase. If your budget's based on assumptions that are later proved wrong simply adjust your expectations.
Use these tips to ensure you use financial budgets effectively to make better financial and business decisions and ensure your business is always profitable.