One of your company’s strongest assets is its ability to assemble an Annual Operating Budget and Cash Flow Estimate and to determine financial requirements for achieving revenue goals. In order to make wise, financial decisions, it is imperative to know your breakeven point, your direct labor costs in relation to your cost of goods sold, and your monthly cash requirements. Acquiring operating performance data, on a timely basis, strengthens your ability to better manage your business.
Reliable operational plans, budgets, and forecasts --that are accurately produced--are integral elements for growing your business. With systematic processes in planning, budgeting, and forecasting, your staff shifts its scope from data collection to meaningful data analysis. Planning, budgeting, and forecasting processes connect your company's budgets to your company's strategies. The connection between budgets and strategies ensures that the financial resource requirements are available to support the anticipated future growth of your company.
A budget is a plan of activities expressed in monetary terms of the assets, equities, revenues, and costs that will be involved in carrying out your company's plans. A Master Budget is a set of projected or planned financial statements. The Master Budget consists basically of a pro forma income statement, a pro forma balance sheet, and a statement of cash flows. As a management tool, the Master Budget is used for both planning and controlling.
Wow… before you start shooting arrows at me, let me explain. I mean no disrespect, entrepreneurs, are some of the most hard-working and honest individuals you will ever meet. In fact, I'm a life-long, entrepreneur myself. But, if we, entrepreneurs are truly honest with ourselves; we must admit that we are a bit two-faced at times!
Give me a moment to explain:
The red-faced entrepreneur is best characterized by the phrase, fire away… fire away… fire away.
When we are sporting our red-faces; we don't think, we don't plan, we just react. We're very quick to pull our decision-making trigger! This is our emotional face.
Whereas, the blue-faced entrepreneur is characterized by the phrase, ready…aim… fire.
When we, entrepreneurs, show this side of our faces; we are prepared. We are determined! We analyze the situation; we plan our course of action; and we have a laser focus on our targeted objective(s)… This is our confident face… our face of success!