Your business plan is a roadmap for your future development. It describes your business, its objectives, financial forecasts and your market. It can help you secure external finance, measure success and grow the business. However, for internal management purposes, budgeting can be the most effective way to control your cashflow, allowing you to invest in new opportunities at the appropriate time.
If your business is growing, you may not always be able to be hands-on with every part of it. You may have to split your budget up between different areas such as sales, production, marketing, etc. You'll find that money starts to move in many different directions through your organisation - having a budget is vital to ensuring that you stay in control of expenditure.
What is a budget?
A budget is a plan to:
- control your finances
- ensure you can continue to fund your current commitments
- enable you to make confident financial decisions and meet your objectives
- ensure you have enough money for your future projects
It outlines what you will spend your money on and how that spending will be financed. However, it is not a forecast. A forecast is a prediction of the future whereas a budget is a planned outcome that your business wants to achieve.
Benefits of a business budget
There are a number of benefits of drawing up a business budget, including being better able to:
- manage your money effectively
- allocate appropriate resources to projects
- monitor performance
- meet your objectives
- improve decision-making
- identify problems before they occur - such as the need to raise finance or cashflow difficulties
- plan for the future
- increase staff motivation