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Join Kevin Hunter and David Ford on The Business Forum Show as we discuss the importance of Budgets, Cash Flow Forecast, and your Measurables (KPI's - Key Performance Indicators) in business.
Budgets: The ability to manage your money is always critical to your success in business. A budget provides insight to where your money is being allocated and how to most effectively manage it. There are several tools that can help you manage your expenses. A monthly budget worksheet is a great start; however, most financial experts will advise you to look at historical information as well so you understand future expenses. What were your expenses last year? How do they compare to this year? Other tools include daily expense logs, or even envelopes for each monthly expense.
Cash Flow Forecast: Knowing what revenue you are producing and where it comes from is huge. Having a good cash flow forecast helps you to Identify potential shortfalls in cash balances in advance, and gives you an opportunity to find a solution before the problem occurs. Your forecast will also help you make sure that the business can afford to pay suppliers and employees, and you'll do a better job of invoicing and spotting problems with customer payments too. Without cash, you business will soon become insolvent.
Measurables - Key Performance Indicators (KPI's are quantifiable measurements that reflect the critical success factors of an organization. They will differ depending on the organization. Whatever KPI's are selected, they must reflect the organization's goals, they must be key to its success,and they must be quantifiable (measurable). KPI's usually are long-term considerations. How they are defined and measured does not change often, but the goals of a specific KPI may change as the organization's goals change.
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