Past data is usually the best starting point for both forecasting and budgeting. An exception is zero based budgeting (where past data is not used).
While building a budget, following steps can be followed:
a) Reviewing and understanding all the required inputs for your budget.
b) Analyzing previous budgets and other historical data. This will help to determine expense and revenue expectations for each fiscal month and year.
c) Consult with cross-functional stakeholders such as sales leaders, budget owners, and C-suite executives to formulate the plan as a team.
d) Identifying KPIs and other performance ratios to see how the budgeted results stack up against previous years or anticipate changes in market conditions.
e) Review the final budget and start looking at opportunities for strategic growth (like investment and divestment opportunities, adding or reducing debt/equity, etc.)
