Here are some examples where a budget can help you in your business;
- You would like to know if your sales can support your overhead.
Once you know your overhead, you can create a targeted amount of monthly required sales in order to be profitable.
- You have a finite amount of money to spend, and you need to make sure that you spend them wisely.
You would like to know in advance if you need to hire additional staff and if you can afford their salary.
- Your budget can inform you that you will be hitting a certain milestone.
You may need to hire additional customer service reps, or other staff members. Wouldn't it be great if you could plan that in advance?
- Long-term cash flow
If you need to obtain new funds, your budget should give you your cash position over the next year. If you project a shortage of cash, now is the time to plan ahead. You should start working on obtaining more financing, or perhaps look into getting outside investors.
Read this article to learn the difference between a budget vs. forecast in accounting