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Budget Preparation

 

More small business owners and entrepreneurs are of not great concern about budgeting . They view annual budget confines the desire of business growth and limits the flexibility. However, they are wrong!

Here are three reasons:

  • It will help you avoid running out of money. If you’re like most entrepreneurs, you’ll fluctuate between a conservative reality and an aggressive dream state, which keeps you motivated and helps you inspire others. When you build your budget, start with expenses -this will keep you grounded and reduce your risk of running out of working capital.

  • It will help you to become a better manager. When done properly, budget can be extremely useful in testing and refining your ability to forecast and manage. You can deploy budgets to hold managers accountable or use budgeting to test whether the drivers of your business hold true. One simple way to start off is to set an annual budget with a set of key assumptions, then reforecast every quarter by updating the assumptions with the latest development

  • It will help you raise money. You will realise the importance of budgeting when you are raising fund from angel investors or institutional investors. One of the conditions of the investment requires the management to provide the investors with annual budget. Developing a company culture that tracks results to budget will help you meet and exceed the expectations of your investors.