Budgeting is not a forecast. A forecast is a prediction of the future whereas a budget is a planned outcome of the
future.
There are a number of key steps you should follow to make sure your budgets and plans are as
realistic and useful as possible.
Make time for budgeting
Never say NO TIME for budget planning. You have to Invest some time in creating a comprehensive and realistic budget, it will be easier to manage and ultimately more effective.
Historical Figures (As a guide)
Use historical information on sales and costs as a indicator of likely sales and costs. But you need to put your Sales Strategy in consideration, and how your Resources will be used and any changes in the Competitive Environment.
Create realistic budgets
Work out the relationship between variable costs and sales and then use your sales forecast to project variable costs.
Make sure your budgets contain enough information such as sales, costs and working capital. Accounting software can help you manage your accounts.
Involve the right people
It's best to involve the staff with financial responsibilities, so they can provide you the estimates of figures for your budget (Such as sales targets, production costs,
specific project control, etc). If you balance their estimates against your own, you will achieve a more realistic budget.
