A strategic budget is a high-level forecast of income and expenses that helps a business identify future financial needs and plans based on expected profit, expenses and cash flow. If a business doesn’t have the budget to support its strategic plan, the business needs to either modify its plan or find the financial means to support the plan.
Budgets cover a certain period of time. Most businesses develop monthly, quarterly and annual budgets. The Entrepreneur Small Business Encyclopedia recommends developing budgets that cover at least three years, and preferably five years.
When it comes to making managerial decisions, the single most important thing for most business owners is the amount of profit they share or reinvest. While countless factors affect business profit, one of the key issues that can make or break a business is budgeting. Through strategic budgeting practices, businesses can start down the road toward success.
Things to consider in the Strategic Budget:
Technology is consistently evolving, and step-change investment is needed every couple of years, or more frequently for some industries.
Businesses that operate in multiple markets should frequently carry out strategic assessments to evaluate the performance of each market. These assessments should look at the revenues of each market relative to money invested. Also consider other factors such as possibility for growth, and possible competitor threats and the dangers of market fluctuations.
If one area of business fails to bring the intended returns while another has exceeded expectations, then consider reallocating funds from the lower-performing area to the higher-performing area.
Most businesses have continuing relationships with other businesses, buying products and services from some, and selling products and services to others. Such relationships tend to result in certain price expectations. However, by doing some investigation, businesses can find ways of cutting costs by establishing new relationships.