Budgeting
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What would you do?
Mei Po runs a small artisan shop that makes decorations and gifts for the Chinese New Year. Unique hand-crafted touches and a great word-of-mouth reputation keep her products in high demand.
Recently, Mei Po learned that the space next door was available to lease. The timing was right as she was looking to expand her business. But as she reviewed the loan application, she noticed that in addition to a business plan, she needed to prepare a one-year budget. Mei Po was taken aback.
She planned her cash-flow month to month. How could she predict what would happen over the period of a year? It seemed impossible.
What would you do?
The first step in developing a budget is to establish a set of assumptions about the future. Questions Mei Po might ask include: Will the demand for her gifts grow over the next year? If yes, by how much?
The next step is for Mei Po to calculate expected revenues and expenses based on past performance and future expectations. The difference between revenues and expenses is net income. If Mei Po is satisfied with the numbers, she can finalize her budget. If she wants higher net income, she needs to identify new strategies that will support different assumptions.
In this topic, you'll learn how to identify and create a budget that will most effectively help you meet your business goals and how to use communication skills to develop realistic, accurate budgets that keep your organization on track.
Mei Po wants to expand her business. How can she budget for the next year?
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Topic Objectives
This topic helps you: * Understand what budgets are and how the budgeting process works * Prepare different types of budgets * Create "what if" scenarios * Monitor and evaluate budget performance
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About the Mentor
V.G. Narayanan

V.G.