The budget is the financial expression of a company’s operating plan for a specific period of time, usually one year. In general, at the beginning of the year, managers prepare a plan detailing the achievements to be obtained during the period with respect to income, expenses and utility.
It is one of the most valuable tools that your company can count on because it gives you a plan of action both in the short and long term. When used efficiently, it can help you meet your business goals, identify early warning signs and transform your business into a more productive and profitable one to have a competitive advantage in a challenging market.
Have a defined strategic plan and organizational goals
Before starting with the preparation of a budget it is important that you stop to take some actions that can make all the difference to successfully implement this practice:
Establish the financial goals of your company: Fixed specific, measurable and realistic goals will provide your Budgeting in UAE with a real and important objective and will serve as a motivation to carry it out. For example, one goal could be to increase net profit by 5% at the end of the fiscal year.
Analyze trends in your income and expenses from previous years. Make FTA queries Abu Dhabi to the best companies there. The online companies are coming with the best effects.
To have more accurate projections is essential that they are based on real information that you have in your company, it is useful to observe how much has been the average expenditure in each category and in the same way you do with sales.
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Forecast sales or revenue
The first piece of information you must count on is the amount of estimated sales. To determine this number it is essential that you take into account some factors that influence it, such as:
- Estimated demand for the product or service.
- Target market.
- Direct and indirect competition.
- Average market price of the product and / or service.
- Production capacity.
You can estimate 3 main scenarios: low sales, moderate sales and high sales.
The goal of the sales forecast is to make the best possible estimate based on the information that is currently available, in this way you will be ensuring that your projection is as close as possible to reality, this is of great importance since on this data is that decisions are made in different areas from production, purchase of raw materials to recruitment of personnel.
- There are several methods to make a sales forecast , among others are the following:
- Historical data: Consists of taking into account the sales of previous years and analyze the trend, for example if in past years there has been an increase of 10% in sales would be predicted that they continue to increase at the same rate.
- Market trends: In this method what is taken into account is some indicator or statistics of the sector or market such as the Consumer Price Index.
- Potential market sales: To carry out a forecast based on this criterion, you must consider the total sales estimated to be generated in the market in which you compete, in that way based on your capacity to Production and distribution will determine what percentage of that total you could achieve.
- Personal judgments: Under this modality, what is done is a survey with specialized people, it can also be based on your own experience in the business, asking your employees directly related to sales, etc., in this way you can manage to estimate the sales trend.
Budgeting expenses (fixed and variable costs) For any company it is important to have tools that allow you to have control and follow-up on the investments made and the outflows of money, that’s why the budget of expenses takes importance.
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In this way you can detail each of the expenses and have your resources in the most efficient way, to estimate it is essential that you consider the points for Vat penalty Dubai. General expenses of the company, divided by fixed (water, electricity, payroll etc.) and variables (selling costs, administrative expenses).