This document provides information on budgeting and forecasting for small businesses. It discusses the benefits of budgeting such as facilitating strategic planning, understanding costs, and aiding decision making. A budget is defined as a goal for what is planned to happen, while a forecast estimates what will realistically happen. The document recommends that all businesses create budgets that include revenue, expenses, staffing needs, and cash flow. It also provides tips on creating budgets using a bottom-up or top-down approach and reviewing actual results compared to the budget regularly.

1. - 1 -
Small Business Tips: Budgeting and Forecasting
Upcoming Events:
• Webinar: How to Survive Today’s Volatile Market
 April 21
• Business Valuation in Exit Planning
 May 10, Skoda Minotti - Akron
WELCOME!
Follow us on:

2. Small Business Tips:
Budgeting and Forecasting
Dawn Gainer, CPA
March 9, 2016

3. 3
AND FORECASTING
BENEFITS OF BUDGETING
Facilitates strategic thinking
• Where do I plan to go, and how
will I get there?
• Where will I focus my marketing
dollars?
• Will I need to purchase equipment
to achieve my goals?
• Will I need to add staff?

4. 4
AND FORECASTING
BENEFITS OF BUDGETING
Deepens understanding of the costs that drive your business
• Identify fixed costs
• Identify variable costs that will fluctuate with the level of sales
(e.g., wages, materials)
• Review all costs for possible reduction or elimination

5. 5
AND FORECASTING
BENEFITS OF BUDGETING
Aids in planning – encourages proactive thinking
• Allows businesses to capitalize on opportunities
• Enables strategy or direction change based on market
conditions or actual experience
• Helps to identify the appropriate level of growth, and a plan
for achieving that growth
• Improves ability to take advantage of a rising trend
• Allows businesses to anticipate limitations and plan ways to
overcome them

6. 6
AND FORECASTING
BENEFITS OF BUDGETING
Aids in decision making
• Timing of purchases
• Buy vs. lease decisions
• Launching/discontinuing a service
or product line
• Marketing/advertising
• Hiring staff vs. outsourcing

7. 7
AND FORECASTING
BENEFITS OF BUDGETING
Provides accountability and motivation
• Owners
• Managers
• Sales force
• Owners and employees should be held accountable for
setting and achieving the goals of the organization
• Posting visual goals keeps them front-of-mind

8. 8
BUDGET VS. FORECAST
Budget
• What you plan to have happen; a goal
• Usually static
• One- to three-year time period, can be up to five years
• Challenging goal; but attainable
• Versions (worst case, middle of the road, best case)

9. 9
BUDGET VS. FORECAST
Forecast
• What you think will really happen; not a goal
• Periodically revised based on actual results
• May use budget as a starting point
• Usually covers shorter duration – e.g., one year
• Can be rolling – always covering the next 12-18 months

10. 10
WHO SHOULD BUDGET?
• All businesses
• All business owners
• Do not delegate this responsibility to the accountants
• Involve owners, managers, sales people, office clerks—all
levels of staff

11. 11
WHAT SHOULD BE BUDGETED?
Revenue and Expenses
• Revenue is the starting point – can be total revenue/sales or
by product/service line
• Expense budget should focus on cost drivers
• Variable expenses – those that fluctuate with level of
revenue should be adjusted according to revenue budget
• Fixed expenses should be adjusted for known increases
(e.g., rent increases, insurance rate increases, etc.)

12. 12
WHAT SHOULD BE BUDGETED?
Staff/Employees
• The number of required employees to achieve goals
• Pay increases for existing staff
• Benefits – health insurance increases, 401(k) matching
increases
• Additional wages for new staff
• Subcontractor wages

13. 13
WHAT SHOULD BE BUDGETED?
Cash Flow
• Insufficient cash is bad; excessive cash is bad
• Budgeting enables maintenance of just the right amount of cash
for your business
• Not all cash inflows and outflows will be captured with only a
revenue and expense budget
• Inflows include customer receipts, draws on loans or lines of
credit, capital/equity contributions, interest income
• Outflows include payables, payments on loans or lines of credit,
owners’ draws, capital purchases

14. 14
AND FORECAST
HOW TO BUDGET
Budget
• Does not have to be elaborate or detailed
• Prior year actual results are a good starting point
• Can be monthly, quarterly or annual
• Document assumptions used when building the budget
• Compare actual results to budget periodically
• Research and understand variances

15. 15
AND FORECAST
HOW TO BUDGET
Forecast
• Use budget as starting point
• More beneficial if monthly or
quarterly
• Roll in actual results as they occur
• Adjust future months/quarters
based on current trends

16. 16
AND FORECAST
HOW TO BUDGET
Bottom-Up or Top-Down Approach
• Bottom-Up – gather plans/goals from managers, sales
force and employees and combine for total budget
• Top-Down – set budget for total organization and delegate
determination of how to get there to employees/staff
• Can be applied to smaller businesses with little or no staff as
well – top-down starts with revenue; bottom-up starts with
break-even point or desired profit

17. 17
TOOLS AND RESOURCES
• Budgeting and forecasting software
— PlanGuru, QuickBooks
• Excel or piece of paper
• Industry trends and benchmarks
• Accountants and financial advisors
• Business coaches
• Peers and other business owners

18. 18
CONCLUSION
• Don’t just set the budget aside and never look at it again
• Review actual results to the budget periodically – focus on
the future, not the past
• Analyze variances and adjust your business plan/forecast
accordingly
• Take action and don’t make excuses!

19. 19
QUESTIONS?
Dawn Gainer, CPA
Managing Director, Small Business Services
Skoda Minotti
440-605-7108
dgainer@skodaminotti.com