As a result, the type of budget you devise will vary considerably depending on the ultimate purpose of the plan. The following steps will help you define your objectives:
1. UNDERSTAND YOUR COMPANY
Identify your company's Strength, Weaknesses, Opportunities and Threats ( a particular technique known as SWOT) can help you amass valuable facts that will help you identify necessary action to take:
- STRENGTH: What advantages does your company have over rivals?
- WEAKNESSES: Where is the company underperforming and what are competitors doing better and why?
- OPPORTUNITIES: Where are the biggest chances for growth?
- THREATS: What are the biggest obstacles facing you: for example, competition, or shortage of investment capital?
2. LISTEN TO COMPANY SECTIONS
If you are a small company, it will be easier for you to identify the core strengths, weaknesses, opportunities, and threats but in a larger company, these may vary significantly.
- You need to gather information from different deparments to ensure their needs are met by the budget.
- For instance, marketing and advertising may be understaffed, and this could negatively affect overall sales, no matter how much time you've put into improving the core product.
3. SUMMARIZE CORE AIMS
Summaries of the core objectives of the company and the different departments, or mission statements, could include
- "We are trying to increase revenue."
- "We want to raise market share by xx."
- "We need to focus on cutting costs."
- "We need to research new product lines."
4. SET FINANCIAL TARGETS
Make sure you have taken into account the financial targets of every department, including
- marketing and advertising
- purchasing/inventory
- personnel
- administration
- finance department
- sales
- customer service
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