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What type of non-financial information is helpful in constructing the budget model?
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How is non-financial information used to calculate financial information? What advantages does the inclusion of non-financial information have in communicating tactics to make the financial goals?
Every financial assumption is based on non-financial data. For example, how many employees are on the payroll? What is an average percentage raise you will give this year? Are you going to hire anybody new? If so, at what rate? When are you expecting to get that big insurance refund? When do you pay your property taxes? How much will they be? What will the management bonus be this year? When will it be paid? What interest rate is associated with your loan? Can you get a better rate from another financial institution? If you don't know, how soon do you intend to shop that?
A budget is nothing more than quantifying your operational business plan for the year. Any fool that says "the accountants don't need to know that" is going to end up with an inaccurate budget.
One Response to “What type of non-financial information is helpful in constructing the budget model?”
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November 27th, 2008 at 2:14 am
Every financial assumption is based on non-financial data. For example, how many employees are on the payroll? What is an average percentage raise you will give this year? Are you going to hire anybody new? If so, at what rate? When are you expecting to get that big insurance refund? When do you pay your property taxes? How much will they be? What will the management bonus be this year? When will it be paid? What interest rate is associated with your loan? Can you get a better rate from another financial institution? If you don't know, how soon do you intend to shop that?
A budget is nothing more than quantifying your operational business plan for the year. Any fool that says "the accountants don't need to know that" is going to end up with an inaccurate budget.
References :
I'm a CPA. I've been through this a hundred times.