al budget
Post on 19-Oct-2014
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DESCRIPTION
Budget 101: It’s always important to watch your departmental budget, but during tough economic times, you’ve got to watch it like a hawk! In this Amazing Leadership podcast, Roy provides basic budget information to get you started on managing this key information.TRANSCRIPT
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Budget 101
As a business leader, you manage:-People-Planning-Problems(not always in that order!)
Budgeting is part of planning.
Failing to Planequals
Planning to Fail
Typical budget is month-to-month for 1 year
AND quarterly long term
(3 years)
Two basic budget elements:
- Income (sales)- Expense (rent, salaries, taxes)
Income is based on sales.
If you are in a department that does not generate revenue, you are in a cost center.
Expenses can be:
- Fixed (rent)- Variable (travel)
Expenses are grouped as:
-Cost of Goods (COGS)
-Operating Expense (OpEx)
-Capital Expense (CapEx)
COGS is the expenses incurred in the manufacture of a product. This includes direct labor, materials and overhead.
OpEx is on-going cost for running a business.- Advertising- Telephone- Salaries-Taxes- Insurance- Depreciation
CapEx is cost to buy fixed assets or to add to value of an existing fixed asset. Assets typically in use for at least one year and not for resale.- Computers- Vehicles- Test Equipment
Create budget showing existing/projected sales and expenses.
KNOW your budget and review it monthly.
Monitor OpEx CLOSELY.
If revenue is decreasing, you must decrease expenses at a faster rate.
Compare the growth of your income to growth of your expenses monthly.
0
750
1500
2250
3000
Income Expense
0
500
1000
1500
2000
Income Expense
What do your
numberslook like?
Review your budget with your team as appropriate.
Ask them for ideas and help in reducing expenses.
Meet with your Finance rep or
accountant regularly.
Know your numbers.
Watch Revenue & OpEx.
Manage expenses AGGRESSIVELY.