8 key budgeting tips for your management team
Posted by Arjun ThomasAn interesting article written by Gene Siciliano I came across.
Most companies with sales under $10 million, and some much larger, don’t use budgets to help them meet profit goals. CEOs and operating owners reason the effort to learn how to build, and then use, a workable budget is just too much. They seem to feel it’s more frustrating than just hoping the numbers will all work out, if they only sell enough widgets or services or whatever.
There is no need to quote business failure rates among companies in this size range, nor the steady stream of survey findings that say lack of good management practices is usually to blame when a company falls short of its potential. Instead, it would be more productive to follow some tips to make budgeting easier. Even if you’ve never done it before, or at least never done it successfully.
The overriding principle: Profit planning, or budgeting, is far and away the most effective way to consistently meet profit targets and avoid costly surprises. It helps you invest your resources to best advantage, based on careful consideration rather than the urgency to make a move “today.”
CEOs or business owners need to decide it’s time to begin controlling the bottom line with some of the same tools they use to control the top line, especially since these days the bottom line is more controllable than the top line.
Here are 8 tips for your consideration:
1) Take the time, take the team. A budget is not the forecast you put together on the weekend to impress your banker. It must be the result of coordinated input and effort by you and your top management team. That makes it a project that requires some time and thought, just like any other important project your company takes on.
2) It takes a little practice, like any new tool. Regardless of how tough it may be to estimate the future, your forecasting accuracy will improve, and you’ll be better able to control the results, if you actively use a budget. Practice does make (almost) perfect.
Read the rest here..
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