Little Black Book of Budgets and Forecasts

Rating:
Summary: Dated, but good on basics
Review: Here's my quicky summary of this book:

1. An overall budget predicts income, expenses, and cash flow.

2. Don't bother building a budget if you're not going to look at actual spending and try to determine the cause of any variances. If the variances come from reasonable causes--as they almost always do--the budget must be changed to reflect the new conditions.

3. Researching and documenting assumptions are the key to good--and justifiable--forecasts and budgets. Don't budget based on pie-in-the-sky sales wishes or broadly-stated percentage increases over previous periods. What's going to increase and why?

4. An expense can be estimated from current and historical information, reasonable growth projections and timing estimates. It should include the effects of current or improved controls (approval processes, expense reports, centralized purchasing, appropriate categorization, etc.).

5. Working capital matters: set aside reserves, collect accounts receivable promptly, plan inventory and capital purchases, use controls. Use a Cash Flow Statement to project cash balances and avoid running out of cash.

6. When a variance occurs, determine whether the problem is due to a false assumption--in which case the budget must be revised--or a failure of controls--in which case, processes may need to be introduced.

This book is a bit dated. It seems unaware of spreadsheets and other computerized financial management tools. Even forgiving that, its proposed forms for changes and documentation seem a bit simplistic and therefore unhelpful.

On the other hand, it's a very good introduction to budgeting, and the main message ("Document your assumptions!!") seems like a great one to learn.

--Eric

Rating:
Summary: Dated, but good on basics
Review: Here's my quicky summary of this book:

1. An overall budget predicts income, expenses, and cash flow.

2. Don't bother building a budget if you're not going to look at actual spending and try to determine the cause of any variances. If the variances come from reasonable causes--as they almost always do--the budget must be changed to reflect the new conditions.

3. Researching and documenting assumptions are the key to good--and justifiable--forecasts and budgets. Don't budget based on pie-in-the-sky sales wishes or broadly-stated percentage increases over previous periods. What's going to increase and why?

4. An expense can be estimated from current and historical information, reasonable growth projections and timing estimates. It should include the effects of current or improved controls (approval processes, expense reports, centralized purchasing, appropriate categorization, etc.).

5. Working capital matters: set aside reserves, collect accounts receivable promptly, plan inventory and capital purchases, use controls. Use a Cash Flow Statement to project cash balances and avoid running out of cash.

6. When a variance occurs, determine whether the problem is due to a false assumption--in which case the budget must be revised--or a failure of controls--in which case, processes may need to be introduced.

This book is a bit dated. It seems unaware of spreadsheets and other computerized financial management tools. Even forgiving that, its proposed forms for changes and documentation seem a bit simplistic and therefore unhelpful.

On the other hand, it's a very good introduction to budgeting, and the main message ("Document your assumptions!!") seems like a great one to learn.

--Eric

Rating:
Summary: one of those desktop reference books you MUST have
Review: recently needed to create a large budget and discovered that i bought this book in May 1990. it never leaves my desktop. great insight into creating budgets that really work. and what to watch for before they break. great examples. excellent index!