Planning a financial budget is certainly one of the most important things a company can do, It is defiantly impossible to get anything done correctly in company without a financial budget, and in the more experienced company models it is against the law not to have financial budgets that shows you exactly what is the company's financial position in terms of cash flow and cash availability.
Planning your financial budget is probably the most importantly thing you can ever do to help company. A well planned financial budget that is well executed is going to be a good help to any company, naturally a badly planned financial budget will defiantly be the collapse of any company before they even have the chance to be successful.
So, what is it that actually makes a great financial budget? Well, in a nut shell any financial budget that has incoming money that covers the out going monies is a great start. Even more so, the cash inflows must at least be equal if not in more than of the cash outflows and the cash outflows together have to produce something that is very competitive to the company itself. So simply put you need to make more money than you spend.
A great rule to follow when putting together a budget is the cost efficiency principle. This principle simply says that you should try not be tentative to spend y amount of money if you are will get z amount of money in return with z being at equal to y if not higher. Now, this is a very interesting idea but some might argue that it is not doable in the early stages of a company because a company needs to spend a lot of money to get itself off and running successfully.
This is a very critical point, but one that is very superficial at best. Although each item y might not produce a gross income of z, you can add other items together to receive that result. Suppose you have a + b + c resulting in e + f + g and both of these equations are equal to D, then there is nothing to be worried about because you are following to the cost efficiency principle in your financial budget.
This should be exactly how you plan a good budget. You identify exactly what has to be done from a financial point of view and then make sure to do it out in a way that will allow you to apply the cost efficiency principle. Do not ever invest money in a company unless you plan to make profits (or something more valuable than the as money you invested) out of it; If this does not happen you need to ask your self, what was the reason for starting a company. If you would like to know more on this topic check out the link below and get a free copy of “Dotcomology” the art of making money on the internet.
By: Anderson Josiah
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