Budgets are tools to achieve a structured direction and thus are quite necessary for any ambitious business.
It provides direction to the organization and acts as a rudder that keeps the company in line with its goals. By allocating certain amounts to a particular area, management can support their strategic decisions upcoming. Preparing a comprehensive budget makes this possible.Budgets don’t just provide a birds-eye view, but they are also a way to show management’s intentions for the future. Many firms like to have a step-by-step, item-by-item review and analyses of sales, expenses, wages among many other items. Forecasting cash flows, bad debts and receivables cycles all require proactive action on the part of the management.The sole purpose of having a detailed budget for your business is that it allows for business owners to have a detailed view of the company’s finances and current state. Decisions need to be made in a split second and with technological advances, the time and the window for error have both reduced drastically.So what should businesses do in this environment, especially when there are so many uncertainties and factors to consider? The answer is simple, forecast budgeting! Forecasting allows companies, like yours, to channel your psychic abilities and try to predict the future, anticipate changes, prepare for different scenarios and try their absolute best to ensure as much accuracy as possible in planning cash flow management.Businesses today need to know where the money is coming from, going and if they'll have it in a few days or a few months. And the backbone of this new relationship: my budget.Let's face it the modern business world is a never ending maze compromised of internal and external factors. Money is no longer taboo, but something to discuss, share, even love. One that, when used correctly, can create the life I want to live. Now, instead of fearing money, I see it as a tool. I went from not knowing where my money was going to downloading an app that tracked every single penny (of my “wants”). It helps me prioritize, assign value and make concessions that feel empowered, not restrictive, and purposeful, not inevitable. No mystery as to whether I could afford that frozen yogurt in small or large, whether I could book a weeklong vacation or only a weekend away. Once my money was allocated to these constants, I could think about it clearly. (If you take away all your “wants” and it’s still not enough to cover your “needs,” it might be time to downsize or start earning more.) So there are some months where instead of 50/20/30, it looks like 55/20/25 or even 60/20/20. Of course, the first thing you might say is, “What if 50 percent doesn’t cover all my bills?” If that happens, take money from your “wants” to help your “needs” since your day-to-day spending is the most flexible and the easiest place to cut back. The final 30 percent ($900) goes to day-to-day spending for the month (“wants,” like meals out, new shoes, movies).Save 20 percent ($600) toward your goals (like retirement, a new car, and/or an emergency fund).Put 50 percent ($1,500) toward your bills (your “needs” category - fixed expenses like mortgage, utilities, car payments, groceries).When you add up all your paychecks for the month and look at the total, you know exactly what you’re working with - no more, no less. The first step was thinking of my money as a whole. I couldn’t believe I’d been intimidated by it. I dug up the blank spreadsheet and started plugging in my own numbers. My husband (then my boyfriend) and I were sitting around at the end of the year, both of us wondering where all our money had gone. Then I promptly put all of it away and let it sit there for two years, untouched.īut then it happened again.
#Why you need a budget how to
And I sat quietly while he told me how to track my spending. So I nodded politely when he showed me his spreadsheet. That thinking about money so often would suck the joy out of everything. So when my friend told me about this magical “budget” thing, which gave him complete control - and freedom - I was skeptical. Why is there $300.33 in my checking account on Sunday? It makes me cringe to remember. Wait, I had a thousand dollars on Monday. Aimless, young, and perpetually wondering where all my money went. I thought you were supposed to hate money and the relentless pursuit of it. Rather, it’s a thing you never ever have enough of - a constant source of stress and frustration. When you grow up without money like I did, it’s not a thing to love. He was a rare person in my life then: someone who talked about money with complete candor. I was having a conversation with my best friend’s husband. It was similar to the first time I met my husband: significant in hindsight but hardly memorable. I remember the first time I was introduced to budgeting.
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