Starting and operating a business operation of any size requires budgeting and forecasting in order to keep the venture financially sustainable. Basically budget and financial forecasts predict how much money will come and go from your business over a certain period of operation, and may include:
- startup costs
- leasing costs of property, plant and equipment
- cash flow
- how much financing (debt) is required
- breakeven point
- how much to charge products/services (COGS)
- how many staff you can afford
- legal or accounting fees
- insurance costs
- furniture, equipment, supplies or fit-out
Therefore, a good budget and forecast will shine a good light on finding ways to achieve positive cash flow and profit for the business. To improve the quality of your budgeting and forecasting, here are some expert advice and suggestions:
Setting Clear and Transparent Goals
Inaccuracy in fiscal year budgeting often leads to unrealisable goals and misleading predictions of a business’ future development. An overall plan for the fiscal year is based on actual cash flow, revenue and expenses, and not expected earnings. Clearly-set goals, therefore, are key to understanding where the company’s finances are heading and how best to use them.
Making Informed Team Decisions
Budgeting and forecasting is a team effort, put simply. Each department must communicate and liaise faithfully with each other to provide realistic goals for each quarter and year. Different perspectives coming from leaders and teams of different departments should be welcome so that business owners can consider more options for future planning.
For budgeting and forecasting to work reliably and consistently, avoid a static and unchanging budget. Annual budgets and forecasts often become obsolete and inaccurate within the first quarter of the year, and therefore, flexibility is crucial to allow for unforeseen changes and adjusting to them. A rolling forecast can be implement to counter unpredictable circumstances arising, and to keep up with equipment failure, industrial trends and possible internal conflicts. Rolling budgeting and forecasting also let a business align the budget with the annual strategic plan while maintaining the accuracy of budgets and forecasts.
Automated Data Aggregation and Data Entry
By automating and digitising the process of budgeting and forecasting, you can make the entire job easier and more accurate. Using technology for the processes minimises errors (compared to manual entry) and also simplies the process. Once a working budget is created, what is needed is to update it on a quarterly basis to cope with any changes that a business experiences from time to time.
Malaysia Accounting Firm
Managing finances where budgeting and forecasting are concerned is challenging for a business and also one of the most important aspects of running a successful business. Therefore, ensuring that your business effectively keeps track of costs and expenses pertinent to every aspect and function of your operation requires efficient budget planning and finance management.
When in doubt, consulting with a Malaysia accounting firm and accounting service in Malaysia will save you extra cost or prevent incurring expensive errors in your budget and finance forecast.