Business Plans For Dummies, 3rd Edition

Chapter 12

Forecasting and Budgeting

IN THIS CHAPTER

Forecasting your financial picture

Looking at financial alternatives

Forming your company’s budget

You’ve most likely sat down at the kitchen table at some point in your life to put together a household budget — when money was tight and you had to pinch every penny to cover all your bills. Everybody knows what a budget is, of course: a way to figure out how much you need to spend on essentials (rent, utilities, car payments) and incidentals (all the frills that you don’t exactly need, like that new set of golf clubs). By its very nature, a budget looks ahead and combines a forecast and a set of guidelines for spending money.

As you may know from experience, putting together a budget is much easier if you have some basic financial information to work with. You can take comfort in knowing how much money is going to come in, for example, and when you expect it to arrive. You also need to keep track of the essentials that you have to take care of immediately, such as the mortgage and the car payment. Only then can you find out what you have left over. In your business, the leftover is your working capital.

For your company, your ...