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There are several factors in a business that can help you create realistic, and therefore more effective, budgets. There are also online services that can assist in tracking finances, thereby ensuring against financial loss due to poor planning. Sites such as QuickBooks, Intuit, and Peachtree (now Sage 50) provide user-friendly and helpful features, including invoicing and check writing assistance, financial reporting, and reliable integration for accounting functions such that no expense stays hidden or overlooked.
In addition, there are also spreadsheet-based tools that provide you with comprehensive business budgeting help.
Following are five tools that should be included in the budgeting process.
1. Sales forecasts and revenue projections
Sales forecasts are an essential tool for budgeting. You can create forecasts by accessing historical data and evaluating past sales figures and expenses. Most businesses have multiple revenue channels. Ideally, you can begin with a Revenue Projection Model to help analyze prices and also assess the outcome with various figures and percentages.
2. Utilizing capital budgeting analysis
If you’re considering investing in infrastructure, such as equipment, begin with estimating capital purchases. Your capital budget can also include estimates for service or service processes and procedures. With the help of a Capital Budgeting Analysis tool, you can estimate project costs, while also calculating contributions to the firm’s value. The Capital Budgeting Analysis tool functions in an Excel spreadsheet format, while evaluating different project metrics, including profitability index, internal rate of return, and net present value.
3. Tracking expenses with the Expense Budget spreadsheet
Using the Expense Budget spreadsheet, you can determine annual expenses or a budget for annual expenses. Depending on the type of business you operate and the monthly expenses incurred, you can calculate average expenses on a monthly and annual basis.
4. The Cash Flow spreadsheet
The twelve month Cash Flow spreadsheet allows businesses to maintain a cash flow budget to track the amount of cash collected and paid out. This tool compares figures contained in records of income from multiple revenue sources, including sales vs. expenses for business operations. This tool tracks expenses and income, and it presents them in an easy to use format for determining cash flow.
5. The Cash Flow forecast tool
This is a helpful tool for understanding annual profits vs. end-of-year debt figures. The tool can assist in determining which parts of the business are generating more revenue and which parts carry liabilities. Figures provided by the Cash Flow Forecast tool provide insights you can apply in allotting part of future revenue toward settlement of debts. For this reason, this tool also helps businesses create realistic budgets.
Incorporating the above mentioned tools into the budget planning process should allow the process to run smoothly.
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