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One tool that will help you create an accurate 2015 company budget

by , 15 January 2015
You have to budget for the coming year to make sure your company makes enough money from month to month to cover your business expenses.

But thumb-sucking your budget won't help you. After all, if you just guess your income and expenses you're bound to under-budget.

That's why you need to use all the tools at your disposal to create accurate budgets.

And there's one tool that's more important than all the others.

Keep reading to find out what it is so you can use it to create your budgets for 2015...

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When you draw up your 2015 budget, use this one tool

Financial forecasting is by far the most valuable budgeting tool out there. 
The point of financial forecasting is to look at past financial trends to predict future ones. This way, when you create your budgets for 2015, you have something to base them on. For example, if you predict you'll make a profit of at least R38 000 every month, you can budget accordingly. 
But financial forecasting your business finances correctly is an art. 
You have to analyse the past and apply it to the future and see how your current circumstances will affect that. 
It can all get a bit confusing and be difficult to work out.
But only if you don't follow these five steps.
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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.

Follow these five steps to financial forecasting your company's finances 

Step 1: Focus on one aspect of your finances at a time
Pick one area of your finances to look at. For example, focus on your sales figures from the last three years. 
Step 2: Look at your total sales figures for every month for each of the three years
If you're looking at your sales figures, look at the total sales you made every month for the last three years. Look for patterns in these figures. For example, look for months where you sell more than others.
Step 3: Apply the trends you identified to your 2015 finances 
If you see that every year, for example, you sell more in January, February, March, April and May, but in June and July you sell 10% less stock than the other months, you can predict the same for this year. 
Step 4: Look at the impact of the economy 
Study the economy to see if there are any major changes like a drop in the Rand. If there are, these changes could disrupt the patterns in your financial prediction. Adjust your predictions to account for the possible changes. 
To see how much it will affect your business, look at other companies history. If, for example, other companies in your industry are making 17% less profit, chances are you will too. 
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Step 5: Deduct your sales expenses and cost per unit from your predicted sales figures
Work out what your expenses will be to make and sell your product. Deduct these costs from the amount you predict you'll get from your sales. This will give you your total predicted profit or loss. 
Doing financial forecasting will help you budget and show you where you need to be stricter on expenses so you can save money and make the most profit. 
PS. I have another great budgeting tool for you. It's the Master Budget Series and it contains templates for ten of the most common business budget. Get yours here.

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