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Amazingly simple way to manage your financials, thanks to the Master Budget Series
When new expenses arise, no one could have imagined they would be a source of so many serious problems for your business cash flow.
Even the slightest discrepancy in your financial budget can result in you not knowing whether your business is over performing or underperforming.
This is why you need a solid financial budget for your business.
I have just the tool for you…
14 Steps to prepare your budget
Establish and communicate the details of your budget policy by:
· Deciding what sort of profit or profit percentage you want for the year ahead;
· Determining what you want your target mark-up or gross profit percentage to be;
· Setting limits on borrowing or capital expenditure;
· Establishing what's expected to be happening in the economy – will it grow or shrink in the next 12 months; and so on.
Get the opinions of everyone who can give valid input to the budget. The most effective way of starting the 'budget ball' rolling is to bring together anyone who is going to be evaluated by the budget, and anyone who can contribute to the budget.
Decide on sales and production volumes for the budget period;
Decide on your products' or services' selling prices;
Establish what your expected costs for your most important inputs are. E.g. labour, materials and significant overheads;
Select an appropriate inflation rate, if any, for the remaining costs. Remember to always compare the number you choose with the inflation rate in the current period!
Provide the relevant elements of this information to anyone involved in the budget process. So everyone will be on board.
Read on for seven more steps to creating your financial budget.
At Last! Your key to quick, efficient, 100% correct and legally compliant financial statements:
· Why you need financial statements;
· Your legal accounting reporting obligations with IFRS, The Income Tax Act and The Companies Act of 2008;
· The trial balance – the first step to creating your financial statements;
· How to prepare your income statement and balance sheet;
· Cross-checking with other reports, ledger, fixed assets register, inventory list etc.; and
· Red flags to look out for.
Here's how to eliminate accounting errors and draw up perfect financial statements now
See if your outputs are limited, e.g. you get all your raw materials, at the right price and quality; and if you have sufficient skilled staff.
Prepare your sales budget. Your sales budget is the key to the entire budgeting process because it drives your production and most of your expenses and, ultimately, your profit.
: Prepare the subsidiary budgets.
Get all the people who have to implement the budgets to agree and give you their buy-in to your budget.
Put all the separate budget pieces together and you'll have a budgeted income statement, a budgeted balance sheet and a budgeted cash flow statement.
If you operate as a company, get board approval for the budget – this is good governance and will help in complying with the Companies Act.
Install a process that reviews the budgeted results with actual results each month and so you can amend the budget if you need to.
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