Why Business Budgets Matter

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Date: 01/05/2011

Budgets aren't just for big business. Setting out your targets and then monitoring performance regularly can help you get where you're going - and avoid catastrophes.

Setting annual budgets is sound business practice, says Jon Hemming of Unity Management. It turns your business plan into figures which can then be monitored as key indicators of whether you're reaching your targets. If you're looking for growth, start by setting your desired profit margin, then estimate your extra costs and the sales volumes you'll need to cover them. Develop "triple vision": consider the historical perspective while monitoring performance-to-budget on a monthly and quarterly basis. And, while budgets may be management documents, make sure your people know what's being asked of them and how they're performing. It's important for morale and setting rewards.