Budgeting also permits you to identify those factors that are key to the success of the organization. These factors can be closely monitored throughout the year and adjustments can be made for critical elements. A budget documents your goals and expectations for a given time frame. You may want to share your budget information with people inside your organization and with significant third parties, such as bankers. Anticipate future cash needs.
Cash flow is the life-blood of any business.
Budgeting allows you to look at anticipated sources and uses of cash to determine cash needs for the year. These estimates can be helpful in determining if there will be sufficient cash flow for the year's operations or if additional sources of cash will be needed to attain financial goals. Monitor your business' actual performance. Most likely, actual business results will differ from your plan. By comparing actual performance to anticipated performance, you will be able to examine the variances and determine the business factors which caused these differences.