Expense budgets and the impact on profitability
http://www.accountingfacts.net/articles/6698/1/Expense-budgets-and-the-impact-on-profitability/Page1.html
Andrew Junkuhn
You are going to need software to manage the process of cash flow forecasts, sales forecasts and expense budgets.
Google for budgeting software or visit http://www.1234cast.com where you'll find software and more articles on cash flow forecasting and budgeting. By Andrew Junkuhn
Published on 02/24/2010
Budgets, particularly expense budgets, are put in place as a basis for control.
Expense budgets and the impact on profitability
Budgets are the saviour of any company. Without any form of budgeting, it can be near to impossible to project where your company is heading. There needs to be a limit on expenditure, because all too often it is so easy to spend unnecessarily, and that can destroy profits.
Staying the Course
Even with other information available, such as balance sheets and cash flow charts, it can be really easy to sway from your objective and this may be quite unintentional BUT may result in possible liquidation, and it would be partly due to the bad management of budgets.
Research
There is a reasonable amount of research that would need to go into the preparation of any kind of budget. Make it too small, and you lose, make it too big and what could have been allocated elsewhere is now stuck in "limbo", possibly resulting in a smaller future budget, limiting you in some ways.
Precision
Expense budgets show reasonably precisely what is needed to to be done to effectively produce a product or service and allow for a profit from this. Expense budgets are put in place to show what it is you want to achieve. What is your goal ? Sales, but sales with a decent profit.
Reaching your Goals
How are you going to reach your goal what is the most cost effective route to obtain optimum results and making sure your customers are happy. What are your labour costs going to be and how long will it take for any particular project to be completed. And most importantantly, the future is unpredictable and there will always be unforseeable circumstances, so even these need to be catered for.
Realistic Planning
All budgets need to be realistic it's pointless finding an item that costs a third of the price in shop one than in shop three, but it's cost you extra time on a phone, in dealing with sales staff in the negotiation of the cheaper price and possibly things like transport or availability/unavailability may end up making up the difference in the cost anyway, possibly creating something that is now more expensive.
System
Every company has a design, resale, software, wholesale, and fabrication process, and all of these have a certain system to allow for the running of the company, and having a well planned budget in place can only make your company run smoother, more efficiently and professionally.
Its obvious that without a clear view of the costs and expenses in your business you are sailing without a rudder. Put expense budgeting into place and you will often be surprised at much you overspend. It could be the key to profitability you have been looking for.
Staying the Course
Even with other information available, such as balance sheets and cash flow charts, it can be really easy to sway from your objective and this may be quite unintentional BUT may result in possible liquidation, and it would be partly due to the bad management of budgets.
Research
There is a reasonable amount of research that would need to go into the preparation of any kind of budget. Make it too small, and you lose, make it too big and what could have been allocated elsewhere is now stuck in "limbo", possibly resulting in a smaller future budget, limiting you in some ways.
Precision
Expense budgets show reasonably precisely what is needed to to be done to effectively produce a product or service and allow for a profit from this. Expense budgets are put in place to show what it is you want to achieve. What is your goal ? Sales, but sales with a decent profit.
Reaching your Goals
How are you going to reach your goal what is the most cost effective route to obtain optimum results and making sure your customers are happy. What are your labour costs going to be and how long will it take for any particular project to be completed. And most importantantly, the future is unpredictable and there will always be unforseeable circumstances, so even these need to be catered for.
Realistic Planning
All budgets need to be realistic it's pointless finding an item that costs a third of the price in shop one than in shop three, but it's cost you extra time on a phone, in dealing with sales staff in the negotiation of the cheaper price and possibly things like transport or availability/unavailability may end up making up the difference in the cost anyway, possibly creating something that is now more expensive.
System
Every company has a design, resale, software, wholesale, and fabrication process, and all of these have a certain system to allow for the running of the company, and having a well planned budget in place can only make your company run smoother, more efficiently and professionally.
Its obvious that without a clear view of the costs and expenses in your business you are sailing without a rudder. Put expense budgeting into place and you will often be surprised at much you overspend. It could be the key to profitability you have been looking for.