For mature companies, the budgeting process is of enormous importance. Each year, companies manage to introduce an item or two into their budgets to keep pace with the rapidly changing business environment. A solid budget generally includes a macroeconomic forecast for the upcoming year, a description of the business outlook, revenue forecasts by business segments, geography, product lines, etc. as well as pro-forma financial statements, including estimates for the current year, projections for the upcoming year, and comparative numbers from previous years.
Given the important impact that budgets have on companies, creating a more accurate and reliable budget-and communicating it to stakeholders such as the board of directors provides added value to the process. Two additional pieces could be added to the budget package to improve the quality of the budget numbers and to help explain the rationale behind the numbers: (1) organic and inorganic growth and (2) capacity costs.
In most cases, inorganic growth requires an additional investment that’s expected to improve shareholder wealth in the long run.
By incorporating analysis relating to capacity costs, we can properly address the issue of more accurately pricing in underutilization of facilities.
Contact us to learn more about improving your specific budgeting process.
Michael Church
Evolution Business Consulting, LLC
ph: 503.956.2301
www.evobusinessconsulting.com<https://www.evobusinessconsulting.com/
