At the turn of every new year, people turn their thoughts hopefully to what the future may bring. We love to dream up goals and swear to resolutions. Accountants call it budgeting.
But, being called that, people don't love it at all. For some reason "budgeting" strikes fear into many. It can feel like a ball and chain.
But, being called that, people don't love it at all. For some reason "budgeting" strikes fear into many. It can feel like a ball and chain.
"The best way to predict your future is to create it." Peter F. Drucker, author & management consultant
It's a pity. Because a budget can hold great power, and is nothing more than a balance sheet and income statement with a future date.
A balance sheet budget tells what assets we plan to have and how we will finance them. An income statement budget describes what we plan to earn and consume.
Revenue is a bit harder to predict than expenses. We can't force customers to buy our goods or use our services. But we can use trends to make informed predictions, and allocate resources to achieve our sales goals.
Expenses are more controllable. We impose limits and exercise choice. By forecasting revenue and expenses together, we plan our profitability.
No one knows the future for sure, but planning it beats waiting for it to happen. And we suggest you plan with “roots and wings" in mind: grounded in reality, yet aiming to fly high.
Here's to you creating a fabulous 2018.
Peter
A balance sheet budget tells what assets we plan to have and how we will finance them. An income statement budget describes what we plan to earn and consume.
Revenue is a bit harder to predict than expenses. We can't force customers to buy our goods or use our services. But we can use trends to make informed predictions, and allocate resources to achieve our sales goals.
Expenses are more controllable. We impose limits and exercise choice. By forecasting revenue and expenses together, we plan our profitability.
No one knows the future for sure, but planning it beats waiting for it to happen. And we suggest you plan with “roots and wings" in mind: grounded in reality, yet aiming to fly high.
Here's to you creating a fabulous 2018.
Peter
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