Preparing a Budget

It's very essential for every businessman to detail understanding need of business and capital required for each and every stage and in each division such as Sales ,Marketing , Research and Development ,Operations and Administration .

So our focus today is developing budget for any company which is in manufacturing or trading or in service industry .

Mostly there are 2 types of budget Top to down and Bottom up Budget .

The major difference in these both budgets is 
Top- Down having specific goals such as Net Income ,Profit Margins and expenses .and while bottom up having no any specific targets 

For deciding budget all company should have own SWOT analysis .
SWOT :- Strength ,Weakness, Opportunity & Threats .

Some company developing yearly goals for budget such as 

1. Increase Gross sales by 5% 
2. Decrease overheads and administration costs .
3. Reduce inventory by 2% at end of fiscal year 

Once budgets decided top management have responsibility to review in each month .

1. Analayze company overall strategy .
2. Targets for Top- Down Budgeting .
3. Articulate Assumption .
4. Quantity Assumption.

Some factors 

1. Identify cost of new business opportunity .
2. Estimate the savings to be realised .
3. How much cash proposed investment will generate .
4.Timeline for expected costs ,cashflow sensitivity analysis to challenge assumptions .

All company investments performance have to evaluate monthly .

Many entrepreneur at starts did the mistake they don't line up budget and goals for business ,They have not understood importance of these things, trying to run things as it is .even in my past I did same mistake and divert the money also in lucrative opportunities which seems first and later cause big blow and failure .Such kind of things happened and failure is always step for success and lessons to learned .


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