Financial budgeting and planning 101: Getting Started (Part 1)

By acclux team July 14 , 2015

The financial budget is an important planning document for small and midsize businesses, it will help to optimize objectives and tactics that can help to achieve business goals and results and create an early warning system for potential business problems so that management can take action before things get out of control.

Have you ever used a financial budgeting and planning? If you have, how many times you have revisited and compared the performance of your budget? Numerous organizations answer yes to the first question, however, the answer to the second question is typical: one time a year or at the end of the year. When I asked why? The answer is either the cost of budgeting is high, the time not worth the trouble or the knowledge and resources that is available not quite familiar with how to make use of the accounting system for managerial purposes.

While building a solid financial base require a lot planning and projections. Budgeting help you to focus on your company plans and goals. It can prevent the extension of base operations beyond current revenue capacities, and maximize the organization’s ability to respond to favorable variances throughout the course of the year.

Big organizations consider budgeting is the backbone of their own business and something critical to financial well-being that cannot run without it, and now is time for you too to take another look at budgeting and how it will make your goal achievement much easier.

In this 101 guide, we'll look at what financial budgeting and planning for small and midsized companies mean. We'll also explain how your business can benefit from forecasting revenues and finally we will learn how to create a financial budget.

In financial terms, Planning is the process of establishing business goals and objectives with clear business policies by making a definite responsibility assignment. The key to successful planning is to create both long-term and short-term plans.

What is budgeting? Budgeting is the process of establishing financial goals believed to be achievable, planning for fulfillment and then compared with the actual performance. A Budget is a formal statement of management plan set for a specific future time period and once it’s approved it becomes the basis for evaluating company performance.

The benefits of budgeting

It stimulates organizational management to plan ahead and formalizes objectives and goals on a regular basis.
It forces management to provide definite objectives and motivate personnel.
Budgeting is the core of writing a business plan for new and growing business need that correlating the overall company objectives with the actual results. And aid to management when raising capital.
Add a financial stability by creating an early advisory system that can help to avoid problems in early stages.

Some Preliminary steps.
Length of the budget period, before creating a budget, we will need to decide the period of time that the budget need to be developed over. The budget period is not necessarily one year in length and it may be prepared for any period time.

To be continued... Stay tuned to our blog for part 2 of Financial budgeting and planning 101 series.