How to Budget and Forecast for Your Business?
If you are starting a business or if you wish to start a business – there is a pattern that you need to follow according to your goals. You must set some goals to keep things in order if you want to achieve new heights of success. These “goals” can be further divided into “objectives” for your own convenience just so you can achieve them slowly and steadily instead of making a big jump at once.
However, these goals and objectives may lead to disappointment if you are not focusing on your Budget for the business and the process of Forecasting. These two things fall into the field of planning. So, decisions for your business are to be taken in accordance with your budget and future forecasting.
Forecasting is simply “Predicting” what could happen whereas Budget is the maximum limit that you may want to touch; hence, they are not the same, and yet they are related. Predicting the future of your business can be a little difficult if you have just started trading and especially if you do not happen to have a background in managing a business; you can make time-to-time adjustments in your forecasts which will improve your situation. You can prepare weekly or monthly forecasts for your business in the beginning and move on to monthly or quarterly forecasts once your business is stable and established.
Financial forecasts may consist of:
- Initial Investment / Startup cost
- Expenses
- Sales
- Cash Flow
- Cost of Sales (COS) / Cost of Goods Sold (COSG)
Cost of Goods Sold may include all of the cost that was occurred to bring the product into its present location and condition where it became ready to be sold. Initial Investment cost can include all costs that are necessary for a startup, i.e., Legal fees and Advertising, etc.