Page 49 - Budgeting for Managers

Budgeting for Managers
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Product line A set of
for that particular item.
related products, often
In evaluating future
with the same model
sales, there’s a method
name, that share a marketing plan.
called SWOT: Strengths,
Service line A set of related servic- from the marketing plan
es that share a marketing plan. Weaknesses, Opportuni-
ties, Threats. We look at
our past sales and income record and ask four questions:
•What are the strengths of our department or our
product/service line that we could use to increase sales?
•What are the weaknesses of our department or our prod-
uct/service line that might cause sales to fall (for exam-
ple, the retirement of an experienced salesperson)? Can
we do anything about those weaknesses?
•What opportunities for new sales exist? How can we take
advantage of them?
• What threats, from competition, general economic prob-
lems, or anything else, exist outside our department? What
can we do to respond to them effectively, to reduce the risk
and cost or even to turn the threat into an opportunity?
We can revise our business strategy, our marketing plan,
and our budget based on SWOT.

Expense Categories vs. Account Codes
There is one other item we may need to include in our budget.
Accounting departments often assign income and expense cate-

Do All of SWOT
People find it easier to think about good stuff than bad
stuff.We can talk about strengths and opportunities and
then find an excuse to ignore weaknesses and threats.The result is
unrealistic hype, not a good business plan. Focusing on the down side,
on weaknesses and threats, isn’t depressing; it’s actually good for busi-
ness. Entrepreneurs, especially, thrive on challenges. But any depart-
ment benefits from a realistic assessment of weaknesses and threats—
followed by a realistic plan to address them.