Profit Planning In Business

Profit planning is essential for every business. It is a concept that most of us are already familiar with and doing within our own homes. If you know you have a certain bill coming up you will typically plan for it and adjust your finances accordingly. Or say you are planning a vacation you want to go on, most of the time we will create budgets so that we have some money to set aside in order to accomplish this goal. Businesses also have goals and plans, and just like you and I, they have to create budgets to reach them. Most businesses have their budget decided upon prior to each fiscal year and must maintain them to meet their desired financial outcome. Throughout this research paper I will discuss the many advantages to profit planning and how businesses utilize and decide upon their financial budgets.

There are several aspects that need to be considered when creating a budget for your business. First of all, why do you need one and what are the advantages? The U.S. Small Business Administration suggests that a budget can be used to indicate some of the following: funds needed for labor and/or materials, for a new business, total start-up costs, costs of operations, the revenues necessary to support the business, and a realistic estimate of expected profits. If you are beginning a start-up business, a budget may also be requested by banks or other investors before they are willing to help finance you. Without any profit planning, you nor your employees will know exactly what needs to be done and what is expected of you to keep the business afloat. (How To Start a Business Budget)

A financial budget outlines how a business receives and spends money on a corporate scale, including revenues from core business plus income and co...

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...ing and the roads were bad, that would then tell the manager that if there is no snow this year then sales can be expected to be greater. This allows the manager to predict more accurately how much inventory to order and how many labor hours/employees to schedule that week.

In conclusion, profit planning is a crucial aspect of managerial accounting. Hopefully I have helped to show the importance in composing a company’s budget, the different types of budgets that may be implemented, and also how essential it is for managers to enforce and utilize them. Businesses need profit planning so that the maximum amount of profit may be generated. This is true for all forms of business whether it be for a product or service, manufacturing or retail. Without an accurate budget and diligent managers to monitor it, your company may be missing out on potential profit and growth