Posts Tagged ventures
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
Posted by admin in consulting, effective budgeting, performance objectives, production cycles, revenue on July 31st, 2009
Define the tactics that will help a department or company achieve its objectives. Goals and objectives can be achieved only if the company sets out a tactical game plan. There are different ways to get from Point A to Point B and a company’s success will depend on choosing effective tactics to reach those goals. The cost of pursuing those tactics also will be part of the overall budget, reflected as part of the cost of doing business.
The best tactics usually yield the highest reward, whether that’s in terms of annual earnings, market share gain, or growth potential. But tactics vary with each situation, each company, and each strategy. The important thing is that those tactics are reflected in the budget in terms of their effect on both the revenue and expense side.
Identify procedures to help achieve that goal. Procedures are to tactics what objectives are to goals. They are more specific, more operationally oriented—almost mechanical.
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.
Stepping into the Budgeting Process – part 1
Posted by admin in Taxes, consulting, effective budgeting, expenditures, management skills, production cycles on July 30th, 2009
Like any plan, a budget requires more than sitting down, crunching out some numbers that add up to a positive bottom line, and handing it over to the accounting department to plug in. Effective budgeting requires thought, careful planning, and a look at issues beyond the numbers. Consider the following components when you budget:
Be careful how the budget is created. Department managers who are strictly concerned with the bottom line may, just to look good, cut out expenses that are vital for the department to operate effectively. That’s not an effective way to do a budget.
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.