It will be essential to include a component of each project business plan that at least a 3-year budget and forecast, for both responsible business practices and decision making as well as initial funding applicant possibilities.
Efficiently managing your business’ finances is critical to project long-term successes. Good budgeting and financial forecasting skills can help you control the financial health of your business. A budget is a detailed statement of expected revenues and expenses. Your income will include revenues from sales, interest, accounts receivable, and any other revenue sources. Your expenses will include costs such as your payroll, inventory, and insurance. Budgets are often based on an organization’s fiscal year and then broken down by month. Reviewing your budget on a regular basis and adjusting it as needed, will help you keep an accurate picture of your finances.
Developing good budgeting skills from the business get-go can help you:
- Forecast future revenues and expenses
- Identify opportunities for cost-cutting
- Find opportunities to be more efficient and productive
- Ensure you have enough cash on hand to cover upcoming costs
- Determine a break-even point
Your budget needs to be based on realistic figures and assumptions to be effective, Developing a sales forecast can help you build a comprehensive budget. Accurately forecasting future sales is a crucial part of creating a stable budget. Forecasting is not an exact science, but basing your figures on past purchases and well-researched assumptions can help you realistically predict future performance.
When you are developing your forecast, you will want to make sure that:
- Previous sales figures are broken down by month
- Predictions for changes in the size of your market or the economy as a whole
If you are a new business, you will need to conduct market research and analyze the sales of similar companies in your area.
Forecasting can help you:
- Make strategic decisions such as when to introduce a new product
- Identify the best time of year for you and your employees to take a vacation
- Calculate how profitable the boom time must be for the business to survive a slump
Financing is essential to starting or growing a business. A substantial budget tells investors or lenders that you have a well-thought-out strategy and plan. A reasonable forecast shows them that you have researched your business strategies and are aware of the pitfalls and how to deal with them. If you want your business to be successful, you will need to develop proper budgeting and forecasting skills, or work with a professional whom has those skills.