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16/10/2019 08:10:45 PM

How to plan - How to budget (P1)

This process begins by writing down specific long- and short-term personal and business goals. Long term means 3-5-10+years; short term means 3-6-12 months. The establishment of long-term goals (strategic planning) sets the table for the series of annual goals (tactical planning) that will culminate to achieve those long-term measureable outcomes. What are your specific, documented goals?

You cannot do a goal. Setting goals is fast and easy. Achieving goals requires a plan of action with measureable outcomes.

A little bit of structure and discipline goes a long way. Setting and working to achieve goals is one of the simplest and most powerful habits to adopt. Setting and achieving personal and business goals will greatly enhance your life as well as the lives of your family, friends, and business associates. A well-managed planning and budgeting program builds teamwork and communication within families and organizations. Always remember that people working together is the key to our success.

The vast majority of everything that we learn and use in accounting focuses on the past. We study spreadsheets and reports from last month, last quarter, or last year. Planning and budgeting is about the future. We are now working to create spreadsheets and reports as we expect them to appear in the future!

The annual budgeting process begins about three to four months prior to the start of the fiscal year. Consider the following as you formulate each year’s budget:

•         Business and personal goals

•         Market        conditions

•         Economic factors

•         Past history

•         Employee Input—This     is arguably the most important ingredient. If your employees are on board and motivated, the likelihood for success is high.

The first budgetfor all businesses and organizations is the sales forecast. All other budgets follow. Once a sales forecast is established, all related expense line items (budgets) can be created.

Rocky’s Custom Candles has completed their annual pre-budget analysis and established a sales forecast of $8,000,000 for their upcoming fiscal year (1,000,000 units of product @ $8/unit). We will use Rocky’s sales forecast to illustrate some of the budgets that follow.

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