Budget Planning

Explanation

Profit Navigator simplifies budget creation using intelligent prediction based on your company's momentum, past performance, and future goals. Using our Budget Planning Momentum suggestions and budget builder, budgets can be as simple as 2 clicks or as detailed and thorough as setting your own month to month Sales, Costs of Goods and Total Expenses needed to support your complex business needs.

Instructions

Building a Budget the Easy Way

To create your budget using the momentum planning tool, make sure that you have at least 3 years of financial history loaded in your Monthly Data Entry area. If you don't have 3 years of financial history you can still use the momentum planning tool, but the momentum suggestions are more powerful if you can provide up to 5 years of financial history.

Below your monthly budget is the summary view for your budget. This section will show up to 3 years of your summarized financial data: the current year and prior two years. When viewing or modifying your current year's budget you will also be presented with a break-even budget, your prior year's budget, your current year's budget (reflected by the title Working Budget, next year's budget and your budget variance over the prior year).

The next section is where our intelligent budget planning system provides recommended momentum based budget selections - Budget Planning Momentum Suggestions. This section provides 6 options, Last Year Median, Last Year Mean, 2 Year Median, 2 Year Mean, 3 Year Median and 3 Year Mean. The median values in these options shows the difference in median or middle of the road/normal performance between financial years. The mean values in these options takes the average total difference between financial years. Median and Mean values can often be very similar, but using median values will discount very out of the ordinary months.

Below the Budget Planning Momentum Suggestions section is the simplified budget customizer. First select one of the momentum suggestions and if that budget works for you, simply click the Set to Working Budget in the Simple Momentum Budget column. This is the minimum required to setup your budget. However, we also provide 3 testing budget sections that you can use to customize your simplified budget.

Testing Budgets

If your business has seen losses or you feel that you can push your business growth faster than the momentum prediction, you can use one of the 3 testing budgets to set your own customized targets. Simply provide the end-of-year total of Sales, a Cost of Goods percent (this is the ratio of Cost of Goods to Sales), and your expected end-of-year Total Expenses. Our budget calculator will do the rest of the work. When you are happy with your customized budget simply click the Set to Working Budget button below the Simple Testing Budget you want to use. We provide 3 testing budgets so you can quickly see and set a budget that works for you.

If you feel that your business should be more conservative this year, or you feel you should be more aggressive, you can set - for example - Simple Testing Budget 1 to a conservative budget; Simple Testing Budget 2 to a middle-of-the road budget and Simple Testing Budget 3 to an aggressive budget. At any time throughout the year you can change your budget to use one of the 4 simplified budgets - our intelligent simplified momentum budget or one of the 3 customized testing budgets.

If for example, you chose a particularly aggressive budget and later in the year find that some difficulty out of your control is preventing you from hitting your budget, you can shift to a less aggressive budget. However, once you have made a decision on your budget for the year you should generally keep that budget and try to hit your performance metrics. As long as you are outperforming your prior year, your business will be growing. Keep that in mind and don't be discouraged if you don't hit every metric every time.

Some businesses may not have enough financial history for our intelligent simplified budget planner to provide a recommendation, however you can still use one of the 3 Simple Testing Budget sections to provide your own simplified budget if you are unsure of how to set a custom budget for the year. If you have at least one year of financial history (Jan-Dec of the prior year), you can use the Simplified Relational Budget. If however you haven't any financial history, you should use the Custom Budget. You can also choose to use the Custom Budget at any time.

Customized Budget

Once you have set a basic simplified relational budget using the budgeting tools, you can completely customize your month to month budget. At the top of the page in the customized budget section, each of Sales, Costs of Goods and Total Expenses will be filled out. You can modify each individual value as you see fit. You can even forego creating a simplified relational budget if you have already worked out a budget and simply enter those values directly into these fields.

For Advanced Learners

Every business needs a roadmap, or plan, to keep it heading in the right direction. Budgeting is often an area that is overlooked by individuals and businesses alike. Often when one does think about budgeting, budgets are simple, created each month to account for basic expenses. To grow a business you need a plan that gives you the motivation to succeed, and a way to measure your success. You need a road map with indicators along the way, not just at the end of the month, to remind you of what you've accomplished and where you are going.

Once your budget is complete, you will have a road map and testable metrics to guide your business decisions throughout the year. Your budget will drive your company Success Matrix, Preset GAAP KPIs, graphs and charts within the Leadership section and even your Strategic Planning budgets. Setting your budget and committing to that budget is the most important aspect of guiding and informing your business strategy.