What Is an Annual Budget?
An annual budget provides a layout on your projected yearly income together with your yearly expenses. This is commonly used in big corporations and small businesses, but that doesn't mean that an ordinary person like yourself can't create an annual budget. This can also apply on household budget, school budget, or even your personal annual budget.
How to Create a Annual Budget
Statistics show that 52% of employees are stressed about their finances, how much more if you own a huge business? These steps may sound intimidating, but once you get to understand it, you'll find that doing an annual budgeting system is a piece of cake. Bear in mind that this is a very helpful tool in your financial management. This can even help you develop better business plans, work plans, presentations, and proposals for your institution.
1. Gather Your Numbers for Your Annual Budget
Review your previous budgets and consult every department you have in your institution. Survey and gather every last detail for you to prepare your upcoming annual budget report. Take time to review your annual profit and loss statements from the last 2 years, then calculate them. Are your expenses too high? Use a planner and record your gathered data. Try making adjustments; as much as possible, remove high expenses from repeating in your current year.
2. Be Realistic with Your Expectations
You may want to set your bars high when you want to save and profit, but the goal here is to set realistic numbers. Be realistic with your projections and set goals that are actually achievable for your budget plan. Don't project very high revenues and very low expenses. Ask yourself if the expense investments made to create your yearly sales are increasing or not.
3. Apply Your Annual Budget in Your Financial System
Apply your annual budget report to your financial system and see what the outcomes are. Create a table for your monthly projection of your cash flow and expenses. Doing this will give you a clear comparison on how your institution is experiencing profit and loss for the current year, and for the upcoming year.
4. Adjust Once a Year
Sample budgets, when utilized correctly, work better. Ideally, budgets are set once a year and then changed every 6 months. But, expenses may vary differently during the year depending on the situation. You can be ahead or behind your projected budget. Still, don't be hasty with your judgments and treat any unexpected results as an important information to make midyear adjustments for your financial plan.
5. Review, Control, and Tune Your Annual Budget
In case your institution is not meeting your projected budget or financial projections, try to check your expenses again. Consider which expenses need to be controlled or reallocated. What changes are needed to meet your target results? Ask these questions to give light on your problem and make proper adjustments to meet the specified goals.