Chapter 2
Budgeting
IN THIS CHAPTER
Defining the benefits of budgeting
Budgeting profit and cash flow
Determining whether budgeting is worth it
Keeping budgeting in perspective
Staying flexible with budgets
A business can’t open its doors each day without having a pretty good idea of what to expect, and it can’t close its doors at the end of the day not knowing what happened. Recall the Boy Scouts’ motto: “Be prepared.” A business should follow that dictum: It should plan and be prepared for its future, and it should control its actual performance to reach its financial goals.
Business managers can wait for results to be reported to them on a “look back” basis and wing it from there. Or they can look ahead and carefully plan profit, cash flows, and the financial condition of the business to chart its course into the future. The plan provides invaluable benchmarks; actual results can be compared with the plan to detect when things go off course.
Planning the financial future of a ...