Learn budgeting and forecasting basics to improve all aspects of your business. The quality and accuracy of the budget and forecast have a direct impact on cash flow, profitability, job costing and expansion plans for your firm. Time invested to learn these valuable skills is time well spent.

Write down the budget for the month, quarter and year. Review the details with your financial staff or accounting services firm. Discuss the logic behind the values provided to validate the accuracy of these numbers. Follow the three steps below to expand your understanding of budgeting and forecasting.

1. Investigate business budgeting software requirements.

2. Read about forecasting and budgeting.

3. Identify business budgeting software suppliers.

Action Steps to Effective Budgeting
The best contacts and resources to help you get it done

Learn about business budgeting software options

Business budgeting software is a great tool to enhance the quality and accuracy of your forecasting budgets. To determine your needs, make a list of the number of budgeting and forecasting categories, and subcategories and number of transactions per year. Discuss your forecasting and budgeting requirements with your accounting services firm and explore future needs and requirements.

I recommend: Investigate the budget forecasting tools available within your existing accounting system. Discuss your needs with the software supplier to see if additional modules can be purchased. To get a list of the top 5 budgeting and forecasting software needs, try Alight Driver Based Planning and Analytics. To access a directory of accounting software, try Find Accounting Software.

Study budgeting and forecasting

Learn the key concepts in budget forecasting by reading business books. Avoid academic textbooks, as they tend to focus more on the theory than practical applications. Identify books and articles targeted to the business owner's perspective for the best results.

I recommend: Stay current by reading the Budgeting Journal. Budgeting and forecasting basics are key component to business planning and need to be reviewed and changed over time. Business Budgeting Help provides a detailed budgeting book targeted to the small business owner. A complete understanding of budgeting greatly improves the quality of the business decisions made and improve the companies bottom line.

Meet with business budgeting software suppliers

Review business budgeting software suppliers available to meet your needs. Used together with your existing accounting software, these tools help to keep a company on budget by issuing easy to use reports and information to the key decision makers.

I recommend: Investigate the budget forecasting software tools provided by Centage and Host Analytics to improve the accuracy of your budgets. Corporate budget planning is essential for the long and short term success of your company.

Tips & Tactics to Deploy Budget Forecasting Software

Helpful advice for making the most of this Guide

• •  Schedule monthly meetings to review your budgeting and planning reports. Make a list of off budget items to follow up with the area managers. This process will improve the accuracy and cost effectiveness of your operation.

One of the oldest sayings in business is that you have to spend money to make money. But you have to spend your money wisely. And that's where budgeting comes into play.

A basic budget tries to anticipate your spending needs and forecasts your sales and other revenue. A budget helps you predict when money comes in and goes out so you can better manage your cash flow. It's also useful when dealing with bankers on loans. In short, a budget is a useful road map to guide your business through the year.

A good basic budget can:

1. Forecast the timing and amounts of your spending
2. Set realistic goals for income and expenses
3. Give you a standard against which to measure performance
4. Help you control your expenses
5. Show you when you're overspending so you can adjust

Action Steps
The best contacts and resources to help you get it done

Tap budgeting basics with financial software

The three main elements of any business budget are sales revenues, expenditures and profits. To create your budget, you'll need to anticipate a dollar amount for each elements. Existing businesses can look to past figures for guidance; new businesses must make an educated guess.

I recommend: For help getting started, try software such as QuickBooks or Prophix, which can walk you through the budgeting process.

Estimate your revenues

It's better to be cautious with your revenue estimates. If you fall short of projections, you could end up without enough money to cover expenses. It's also important to map out when revenues will arrive. For example, in a cyclical business like retail, you need to budget your cash so you'll be able to pay your bills during slow periods while you wait for the bustling holiday season to arrive.

I recommend: Get help forecasting sales with Forecast Pro software, which uses proven statistical methods to calculate your projections, or download revenue and sales forecasting templates from Microsoft Office.

Estimate your expenses

Calculate when and how much you'll have to pay for business expenses, including things like cost of goods sold, office supplies, rent, utilities, auto expenses, travel, advertising, professional services, loan repayment and taxes. Companies with employees have additional expenses, including salaries, benefits, employee business expense reimbursements and bonuses.

I recommend: BusinessOwnersIdeaCafe.com provides a first-year budget worksheet for startups that includes a list of common business expenditures. To build your expense forecast, try one of the Microsoft Office expense estimate templates.

Put it all together

Once you have all your numbers in place, you can begin to see where your money comes from and where it goes, which helps you direct your attention to areas that need improvement.

I recommend: Computer spreadsheets, such as Microsoft Excel, are the simplest way to build and work with your budget. You can also try plugging your numbers into a profit and loss forecast template from SCORE or into a cash flow template.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  Add a cushion: Your business will need some cash on hand for day-to-day operations and unexpected expenses, so be sure to build cash reserve into your budget.
• •  Use your library: When you're trying to project revenue and need to research your industry, don't overlook your public library, which not only has books and periodicals that might be useful but also reference librarians who can help direct you.
• •  Take a long look: If a one-year budget is helpful in mapping out your immediate objections, then a three-year budget can help you focus on your longer-term goals and outlook.
• •  Measure performance: Once you have a budget, you can periodically calculate how you're doing compared to your plan and make changes as needed in your operations.

Successful business budgeting and forecasting depends on your ability to find, comprehend and synthesize a wide variety of information from numerous sources. The best corporate budgeting tools, software and consultants are useless without a current understanding of business budgeting and forecasting.

In order to properly budget and forecast for a business, you need to stay updated on fiscal and consumer trends throughout local, state, national and sometimes even international levels. When you're looking for the best sources of information about forecasting budgets and fiscal planning, keep the following in mind:

1. News aggregate sites help you sort through ads and products for sale to get the best information about budgeting and forecasting news and trends.
2. The Internet allows business professionals to communicate about business budgeting and forecasting through a variety of alternative media, like radio transcripts and podcasts.
3. Established print outlets with an online presence are reputable sources of budget analysis and forecasting information.

Action Steps
The best contacts and resources to help you get it done

Read up on budget analysis news and trends from across the Internet

News aggregate sites do the work of sorting through varied stories for you, helping you get immediately to stories that interest you, like forecasts for local, national or international governmental budgets or analysis of the latest business budgeting trends and tools.

I recommend: Topix and Newsique collect information on budget forecasting news and trends from throughout the Internet.

Use alternative media sources to get current forecasting and budgeting information

While print and internet remain the standards of budgeting and forecasting publications, the proliferation of alternative offers a wealth of forecasting and budgeting resources. Look for transcripts or recordings of radio programs and podcasts that deal with business budgeting and forecasting. Because transcripts and podcast are more economical to produce than a printed magazine, you're more likely to encounter a wide variety of voices and opinions.

I recommend: Nashville Public Radio offers a searchable database of programs and transcripts to help you ferret out information about budget and budget forecasting newscasts. PodBean.com offers various podcast channels that focus on business matters, including business budget forecasting.

Get the latest information on business budgeting tools from established outlets

Established print outlets like The New York Times or The Wall Street Journal can be counted on for reputable, well-sourced stories about business budgeting and forecasting. Many newspapers and magazines offer an online presence and article archives to help you sort through information, cherry-picking what interests you the most.

I recommend: The New York Times and the Denver Business Journal both offer business forecasting and budgeting news and trends on the local, national and international levels.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  Blogs are another useful tool for tracking down the latest budgeting and forecasting news and trends. Because they're often a quick write, as opposed to a thoroughly fact-checked and edited article in a print publication, you're more likely to hear the author's personal voice and relatively uncensored opinion about budget forecasting tools like business budgeting software or consultants.

Every business owner, investor or executive should have a complete understanding of the company's finances. This remains true even in large companies that employ an accounting team.

Being able to understand all of the terms in budgeting and forecasting statements and plans gives you an in-depth look into the company's financial situation. While some of the terms are closely related, each has its own unique meaning and contains information that is valuable in itself. For example, if you see the term 'profit margin', you must dig deeper to determine what type of profit margin you are looking at.

Action Steps
The best contacts and resources to help you get it done

Marketing financial analysis circle

The marketing financial analysis circle is a model followed to discover if marketing strategies are beneficial to a company. Another component of the circle is finding viable alternatives to popular marketing methods and to determine if these are cost effective.

I recommend: The Food and Agriculture Organization website offers a tutorial on basic budgeting and forecasting methods. In this tutorial, you will find information about marketing financial analysis circle.

Contribution analysis

A contribution analysis shows a company how the cost of making products and the sales price of the products affect the company's bottom line. This includes both direct and indirect costs of making the products.

I recommend: You can find an explanation of contribution analysis on BusinessDirectory.com.

Financial planning

Financial planning is the process of making a plan about how to deal with every aspect of your finances. Mortgage payments, insurance payments, cash, income and investments are all part of a financial plan.

I recommend: Certified Financial Planner Board of Standards website offers information about financial planning, including an easy to understand explanation and some of the benefits of financial planning.

Profit margin

A profit margin is a gauge investors use to determine how a company is performing. There are three types of profit margins: gross, operating and net. Gross profit margin is how a business if faring after paying off the cost of making the product and paying off short term debts. The operating profit margin shows the efficiency of how the business is being managed. The net profit margin shows the relationship of the price of goods sold by a company to the operating costs of the company.

I recommend: Investopedia provides an explanation of profit margin.

Spreadsheet

A spreadsheet is a group of rows and columns that contain financial data that show you how one financial decision can affect other areas of the finances. For example, a spreadsheet can show you how decreasing the sale price of one item will affect the bottom line and management bonuses or profit sharing.

I recommend: WiseGeek provides information about spreadsheets, including a brief history and some sample uses for them.

DuPont model

The DuPont model is a way to determine how a business is faring financially. It combines an income statement with a balance sheet to provide a comprehensive look into the company's finances.

I recommend: 12 Manage provides detailed information about the DuPont model. It includes a brief history, the formula for the model and examples of the model.