Every business needs a budget. It allows you to set your revenue and profit goals, as well as make strategic investments for the year. But one mistake people often make is creating a budget but never locking it. Instead, agency owners continually update the budget as inputs change. This article will explain why it’s important to lock your budget and how to create successful forecasts throughout the year.
The Benefits of Locking Your Budget
Locking your budget means that you are no longer able to make any changes during the fiscal year. This way when each month closes, you can compare your actual performance to how you did compared to the budget. For example, when January is closed, you can easily look back at how much money was actually generated in revenue and profit versus what you thought would happen in January.
Creating Forecasts Throughout The Year
In addition to creating an official budget for the fiscal year, it’s also important for agency owners to create multiple re-forecasts throughout the year. Re-forecasting allows you to update changes throughout the year such as hiring new employees or investing in new technology. That way, when it comes time for end-of-year reporting, you can compare actuals to both your original budget and each forecast from throughout the year. This will help give insight into where things have gone right or wrong over the course of 12 months.
In conclusion, having an official locked budget is essential for all businesses because it provides a standard comparison point throughout each month of a given fiscal year. In addition to locking your budget, businesses should also create re-forecasts so they can track changes made throughout the year and get an accurate picture of their overall performance come end-of-year reporting time. Doing so will ensure that businesses stay on track with their financial goals and make smart investments in line with their strategic objectives.