Do you need a budget?

Beth VadeBonCoeur,
Accountant

Many small companies believe budgets are only used by corporations or government entities. However, budgeting can be a useful tool for companies of all size and individuals as well. Estimating and matching expenses to revenue is important because it helps small business owners determine whether they have enough cash flow to fund operations, expand the business and generate income for the owners.

A budget is a detailed statement of expected revenue and expenses. It can help management to identify their plans for the next financial year and allows them to see the impact of their plans on their financial statement. The budgeting process should be started a few months before your new fiscal year starts. Management should start with actual numbers from the current year and adjust them for changes that are anticipated in the next fiscal year. 

Developing good budgeting skills can help you:

• Forecast future revenues and expenses
• Identify opportunities for cost cutting
• Ensure you have enough cash flow to cover upcoming expenses
• Determine a break-even point
• Identify opportunities to be more efficient and productive

Once a budget is created, the next step is to review actual results to the budget each month. Variances or differences need to be explained and reviewed. This process will help you to understand your business better and can help you to make better decisions.

This article originally appeared in Modern Memorialization, Trigard Memorials' weekly electronic newsletter featuring information for the funeral industry. Sign up for your free subscription at http://www.trigard.com/thursdays.