Monday, September 12, 2016

Balancing the Books: How to Create an Effective Budget

The word "budget" seems to conjure up feelings of sacrifice or deprivation in many who hear it. When it comes to your business and your personal finances, however, a budget is the cornerstone of successful money management. 

Contrary to popular belief, creating an effective budget is not overly difficult, time-consuming or complicated. 

The following three simple steps can help you are on your way to making a budget that works, while taking control of your business or even personal finances. 

Analysis


The first key step is analyzing your financial situation. You need to know where you are bringing money in and where you are spending it. 

You may find that you are spending in areas of your company that isn’t as necessary. You also may find areas of your business where you could be bringing in more money. Constant analysis of your finances will also help you to innovate and stay competitive within your market. 



A budget is really nothing more than a list of monthly income and monthly expenses. The details, however are quite important. 

When taking stock of your business's financial footing, make sure to include every detail from monthly inventory or labor costs to the styrofoam coffee cups in the office. 

Set up monthly reports


You should be able to view the financial health of your business at any time. Ideally, you should have weekly, monthly, quarterly, and yearly financial reports. 

This way you can see the financial activity of your company at all times. These reports will also help you to analyze your company finances showing you where you can cut spending and where you can be bringing in more money. 

Setting up a monthly balance sheet report and profit & loss statement will allow you to get a quick snapshot if the finances quickly and effectively. This can help in building an effective budget by showing you how your cash flow runs throughout the month. 

For example, if you see that your company regularly needs more inventory during certain months, you can then budget those costs accordingly. 

Stick with it


Budgeting is never fun. In a perfect world, it would be nice to just take your money and spend it on all thing things you need and want to keep ahead of your competition. 

But unfortunately this is not a perfect world and everything has a cost. When you have an effective budget, it will help you understand the risk versus the reward when it comes to spending your company money. 



Creating an effective budget takes time and effort, and may need adjusting along the way. The time spent creating a budget is extremely valuable, and you will want to make sure that once you have a budget in place that you stick to it or make changes as necessary. 

A great budget or plan is rendered worthless if it is not consistently put into action.

Don't know how to make a budget? You needn't worry. There are professionals like Navicor Consulting available to assist you. 

These consultants have but one job: To help you improve the bottom line. Money spent in this regard will find its way back to your business many times over. 

Budgets can be a very powerful tool in the world of business and personal finance. If you do not have an effective budget in place, you should make building one the focus of your business. 

A budget is like the foundation of a new and beautiful home; it must be very solid to support everything else and any weakness in it will stand in the way of achieving full potential.

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