Money is a scarce commodity for everyone. Whether it is an individual or large organization money is always needed. There is never a question of having surplus money. Whatever money is earned has its uses. This is why there should be a plan to use the money you earn in a proper way. Companies and individuals need this planning. This planning of how you will use your money in the future is called financial budgeting. Budgeting is not just for money. It is used for all resources including time and manpower. However, this article intends to talk about budgeting services in Singapore that are dedicated to financial planning. Many companies offer this service.
Understanding The Concept Of Sales Budgeting
Most companies have budgets for sales, production, cost of goods, expenses, etc. This greatly helps the company to plan based on past reports. The company uses different management information generated from past performance to plan the future. The budget is prepared on the assumption of the availability of a certain amount of resources. A sales budget is based on the company’s past sales and the expected demand for the products in the future. When the sales budget is made, the company will know how much they will earn in the future.
The management will use various methods to forecast sales in the future. The growth of population, the improvement in the economy, the likely increase in the income of people, etc. for budgeting their sales. Based on all these figures and their capacity to produce the goods, the company will prepare the sales budget for a period in the future. Budgeting helps the company in knowing in the future why and where they have fallen short or sold above the budgeted quantity.
Using Budgeting Services In Singapore To Make The Production Budget
The production budget is also very important because if their sales budgets must be achieved, they must produce the good necessary to achieve that sale. The production budget is prepared to keep in mind the sales budget and the optimum inventory that must be maintained. This will differ from companies and products. The production budget will help the company in planning the purchase of raw materials and ensuring that the necessary infrastructure is available to meet the production budget.
Maintaining high inventory will give the company flexibility in the purchase. But the cost of production and storage must be taken into consideration when planning a high inventory. When the budgeting is done in a way to keep the bare minimum required to inventory the company must keep a close watch on sales and availability of raw materials. The production budget is further divided into budgets for materials, labor and manufacturing costs.
How Does A Company Forecast The Cash Flow?
Cash budgeting is very important for the company to plan its future expenses. The main area of cash budgeting is the receipt of cash from sales. Sales are the major source of cash for companies. They must base their cash budgeting based on the sales budgeting and how they will be collecting the money from the customers. The company uses its past data about how the money from the sales is received. Not all cash is received immediately after-sales. Credit sales are done by all companies and an analysis of cash receipts will tell the company how the cash will be received.
Once the company has analyzed and understood how they will receive cash from sales, they must prepare the cash disbursement schedule. A company needs cash regularly for various expenses and this must come from the sales. There are wages, interest, taxes, rent, etc. to be paid and the company must make a plan about how they will get the money for these expenses. The cash flow forecast is very much needed to ensure that the cash is available at the right time.
How Does A Company Benefit From Budgeting?
Whether you are running a small business or a large corporation, there is a need to have a vision for the future. You must take your mind away from the day-to-day operations of the company and think about where your company will be in a few years. If you want to have such a vision then budgeting is essential. Proper budgeting helps you to plan realistically for the future. You may not always succeed in achieving what you have budgeted, but it will give you an idea about what you will need and how you must earn that income.
Budgeting forces you to review your performances in the right manner. You may be running the company and earning money. But only when you start budgeting will you know where your money comes from and where it goes. It will help you to concentrate on the products or services that earn you more money. it will also help you to cut down on expenses which can be avoided or reduced to a great extent. Both these will help you increase your profits.
Sales budgeting helps to assess the performance of every employee. It is the best way to reward the employees for their performance. Sales budgets will help you know what money you will be earning periodically shortly and in the whole year. This budgeting will also decide what your production must be and the amount of money you will need to complete the production. Having a sales budget helps you plan all the operations in the company.
Many small and medium companies may not be very familiar with the methods of budgeting. Most of them have very little human resources to spare for doing the budgeting for the company. They may also not have experts who can prepare the budgets properly. It is a job that requires expertise in analyzing past performance and make use of that data. These companies should find a good service provider for budgeting. They must find a reliable and experienced company who can do the budgeting properly and help the company plan its future. Budgeting services are available in Singapore.
Companies We've Worked With We can assist you with your innovation or commercialisation journey!