To find the problems in your budgeting process follow these three steps
Step 1: Record the actual sales figures and keep the original budget
Keep your original budget as it is but record the actual sales figures. Then compare them.
This will show you when the changes started happening and when the sales figures moved away from your forecast figures.
This can show you the point at which you made a mistake in your forecasting process. Check your actual expenses and sales, as well as any other factors that you included in your budgeting process.
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Ten budget templates to forecast and manage your company's costs
You can use them individually or while you create your operating budget. You'll draw figures from these budgets so you can keep control of costs and maximise profit. Each budget chapter comes with a free Excel budget template for you to customise and use straight away.
Find out more here…
Step 2: Go back to your financial history and analyse it using graphs
Create graphs to represent the changes in your company's financial history.
These can help you see even slight changes. For example, you might not have noticed that the slight increase in last year's sales was actually quite significant.
Create separate graphs for each area of your forecast, such as your:
Cost per unit expenses;
General expenses; and
Profit or loss averages.
Compare these graphs to your original forecasting to see if there's any new information you didn't notice before.
Step 3: Look for seasonal economic changes that you may not have taken into account
These changes in customers' buying habits can have an impact on your predictions.
Other changes, such as the increased load shedding we're experiencing, might also play a big part. These kinds of changes will affect your ability to produce and sell your product.
Pay special attention to any changes that happened at the end of last year that could still be affecting your finances at the moment.
You need to find out where the problem in your budgeting process happened so you can fix it and apply the changes to your future budgets. Otherwise, you might lose money because of inaccuracies.
And this means you'll just get demotivated as you won't know how to plan for the year ahead.
You can find out more about budgeting and accurate forecasting for your sales figure in the Master Budget Series.