Budgets & Forecasts
The revenue budget is primarily the first to be developed, as costs, capital expenditures and operating expense will all be budgeted to support the achievement of the revenue budgets. Budgets are first developed separately for all the different business verticals and subsidiaries, divisions, and departments within an organization.
After the revenues and costs budgets are finalized, a cash flow budget needs to be developed to ascertain whether the business will be able to generate sufficient cash from operations to finance the budgeted activities or there would be a need to obtain additional finance through equity or debt or both. In such an event the budget should be able to incorporate such needs and the ensuing cost of such financing also needs to be taken into account in the budget.
Despite all the care and diligence that goes into preparing the budget, there is no guarantee that things will go as planned. Regular monthly analysis be carried out of actual performance compared to the budget identifying the reasons for the deviations from the budgeted revenues and costs. Necessary rectifying measure be decided and the revised numbers built into a forecast for the remaining months of the year making best efforts to still achieve the annual budget numbers. The original budget will continue to remain a yardstick through the year to measure management performance.
How we can assist:
Our consultants will work with your team and help them carry out the following process to ensure an accurate and timely budget as follows:
- Review the previous years’ budgets and comparing with the actual performances of those years thereby identifying the areas where major deviations had occurred and would analyzed them for root causes
- Review the strategies and the strategic plan to identify the important elements which need to be considered for formulating the assumptions and developing the budgets. Also review the strategies in light of the current circumstances to see if some of those need to be modified.
- Work with your team to estimate the items of revenues and the associated costs including the overheads.
- Review the estimates of working capital and cash flow forecasts to ensure that these are in line with the revenue and costs budgets.
- Detailed review of the capital expenditure budgets and correlate with the borrowing capacity and financing facilities.
- We would be available to participate in the budget presentation to the senior management and the BOD