Question

With the importance of budgeting in the management decision making process in mind. What advice would give to a friend who expresses an interest in starting a new business?

Answer 1

Althugh budgeting may seem like a mundane step, however it has very important role to play in setting up and running any business. It allows one to understant and charts out a way to spend money in most efficient manner. For someone who is starting a new business, it is more important. A new business owner shall keep one's finances on tracks. One should plan spending for atleast 6 to 12 months in advance. In this way one can gauge where you are spending more and need to curtail your expenses. The lesser the expenses more would be the profit. Hence one shall start off with a documented plan of budget. One shall measure the performance on money invested in business from time to time to assess the profitability and how it can be increased. This was one can cut down on expenses and increase profit. One shall also keep in mind the type of capital structure one should like to keep. If the business seems profitable early on, one can add some debt to reduces tax liability.