It is important for a business to project their first year on a monthly basis for different reasons. The first year for an organization is the most important year for the organization. Configuring the budget, evaluating the reasons behind such expenses as they progress, and monitoring resources are important things to do. By configuring the budget and monitoring expenses, executives and management can prepare for backup strategies and other strategies in a more calm, and steady manner (“Budgeting and business planning”).
By planning on a monthly basis in the first year of operations, executives and management have more of an advantage when it comes to planning strategically. Through planning on a monthly basis, managers can analyze and evaluate their outflows and inflows of their cash and other variables that factor in. With forecasts of sales and expenses as well as predicted income for the next year or two, the budget can be developed on a quarterly time line. The first year is always the most difficult; starting out, managing resources, money, and personnel. That is why the budget must be monitored so closely and frequently (“Budgeting and business planning”).
After the first year once the business breaks even and income matches the expenses, the organization can begin the next steps in their business cycle. Now the plan is to not only make sales, but increase them; as well as products, services. and their quality. Being consumed in budget activities day in and day out will burn out personnel and take up too much time. As a result of reviewing the budget on a quarterly basis, the organization allows time for the plan to be implemented and see how progress is going. With quarterly reviews, the business can evaluate what is working, what is not working, what can be adjusted; and how to improve (“Budgeting and business planning”).
Budgeting and business planning. (n.d.). Retrieved April 4, 2019, from https://www.infoentrepreneurs.org/en/guides/budgeting-and-business-planning/