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Creating a Budget

Often, people use the income and expense numbers of the prior year as the starting point for creating a budget. Then they consider their knowledge of the future expectations and anticipated trends of the industry and adjust the budget numbers to embrace those trends. In addition, a good budgetmaker throws in a dose of personal experience with the way the business operates and the way the business is expected to operate so the budget can accurately reflect the goals and reasonable expectations for the year(s) ahead.

For example, if you are in the new home construction industry and know that the new factory in town will bring in hundreds of new employees, you can reasonably expect your business to increase next year. Or, if your landlord has been raising the rent on other buildings he owns and your lease is due for renewal, you can safely expect your rent expense to increase in the near future.


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