Archive for category financial growth
Basics of accounting – part 2
Posted by admin in Financial Advice, economy, equity, expenditures, financial growth on August 3rd, 2009
Why do accountants use the double-entry system? Well, we could explain how the system is based logically on the principle of duality, because all activities with any economic significance have two aspects—resources and uses, work and reward, loss and gain. Or we could simply point out that recording every transaction twice dramatically reduces the chance of error. The bottom line is that the system works, although it occasionally seems to defy common sense. Don’t expect to understand it all completely now. Our discussion of the general ledger and subledgers should help make more sense of debits and credits.
The most common structure for financial documents, based on the need to distinguish between debits and credits, is the T account diagram. The left side of the T represents debits and the right side of the T represents credits. In the accounting process, a figure is recorded as a debit (left side) or as a credit (right side) depending on how the transaction affects that particular account.
Other roles of the budget
Posted by admin in effective budgeting, financial growth, market forecasts, revenue on July 31st, 2009
A budget has many uses beyond charting the company’s financial goals.
It can assist in measuring the feasibility of technology development— both its likelihood and its application—and can help provide marketplace forecasts. It also may help measure the impact of new legislation affecting the market and may reflect new regulations—both internal and external—that touch the company. It’s all there if you know where to look.
If your company makes ball bearings, the tactics for creating better bearings may be to define consistent settings on the milling equipment and monitor those settings as a way to reduce inconsistencies, thus reduce costs due to production problems. The procedure for doing so might involve a worker performing an inspection every half hour, noting the settings in a log, and reporting to the supervisor any variations beyond allowable limits. Or if your concern is with sales, the tactics may be to identify territory penetration for a sales force right down to the number of new contacts made per week with revenue computed on the number of sales per call made each week. The procedure would likely involve logging all new contacts and tracking the results. These are budget concerns and can be measured by the financial impact on your company of both revenues and costs generated.
Stepping into the Budgeting Process – part 2
Posted by admin in consulting, effective budgeting, financial growth, performance objectives on July 30th, 2009
What company goals does the budget embrace? These goals usually include profitability, but they also include investing in the company’s ability to develop new product and service offerings to customers to help assure the company will be around tomorrow. Nearly all budgets help managers develop a balance between making money today and making money tomorrow.
What objectives can be identified in the budget? Goals are important, but only clearly identified performance objectives will make them happen. Objectives clearly spelled out are crucial so that all parts of the company understand and pursue the same goals.
If your company’s business is manufacturing and marketing luxury powerboats, its objective might be to increase sales 15 percent or establish a new outlet in a neigh-boring city. Increased sales of related paraphernalia as a financial objective might be a secondary objective. All such initiatives need to be reflected in the budget because all are strategic goals that will have either a positive or a negative impact on the bottom line.
Defining Budget Type – part 3
Posted by admin in Taxes, consulting, expenditures, financial growth, management skills on July 30th, 2009
One of the major facets of budgeting is cost control, and that’s also one of the major responsibilities of company managers. Budgets are the key to cost control, but only when managers have had a hand in developing those budgets. If management doesn’t understand and use the budget, it will do a company no good. Involve all pertinent staff in the budgeting process. That allows them greater ownership of the process and enables them to better stay with the budget they’ve helped develop.
Strategic budgets help a company decide whether to invest in a business venture that may take several years to become profitable. A management consulting firm, for example, might be considering whether to develop a software division. A strategic budget would help it figure out (1) whether over the long haul this made good sense, and (2) how long it will take before the venture pays off.
Defining Budget Type – part 2
Posted by admin in Companies, Money Tips, expenditures, financial growth, production cycles on July 30th, 2009
Longer business cycles require longer-lived budgets. Even though they may be subject to review and revisions, some items or operations unfold more fully over a longer time period. This results in a longer-term or strategic budget. While the operational budget anticipates financial flow for a year or less, the strategic budget reacts more intrinsically with a company’s long-term business plan. The net effect may be a less precise, but more comprehensive approach to financial management.
Not all companies need to create a strategic budget. Your company may be one of those happy to project from year to year, knowing that retained earnings and reserves may be all you need to set the stage for the subsequent year’s financial growth. On the other hand, if the company is involved in major capital acquisition that will depreciate over time, includes extensive research and development that runs up expenses for years before any revenue might be realized from the project, or involves extensive investment plans that will take several years to bear fruit, then a strategic budget may be more appropriate.