Every business owner or manager wants to know how things are going during the year. For many the request may be about sales, costs, cash-flow or profits. Each are great indicators of what is happening in the business.
One guidepost generally overlooked is the actual for the year compared to what was planned or budgeted. Each business entity should seriously consider creating an operating budget for each year.
Your operating budget might simply be made up of last year's actual without changes or with modified numbers to reflect what you want your business to do this year compared to last year.
An operating budget plans for income, expenses, asset purchases, debt reductions, marketing, profitability and new business development (R & D). As the year progresses do a monthly or at least quarterly comparative of budget vs actual to see how your plan is working. Make changes and adjustments as needed.
Many software programs and some spreadsheets will help with planning, reviewing and tracking of budgets. Your accountant or bookkeeper can also be a great asset in this process.
Cash-flow tracking of budgeted cash-flow compared to actual cash-flow is invaluable for decision making. Cash-flow is the life blood of your business.
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