Budgeting
 

Budgeting is important because it gives marketing and e-business management a greater vision of your expectations in relation to the rest of the company. A thoroughly planned budget can lead to reduced administrative costs and tasks, increased service levels to employees, and freeing up the finance department to focus on strategy, not spreadsheets. 

Another consideration for budgeting goes beyond an employee’s salary. There should also be consideration towards an employee’s bonus structure. An employee incentive plan is a very important aspect of creating additional revenues for a company. A budget should include an incentive plan for the e-commerce manager that would pay out if they increase overall company sales through online business transactions; if they decrease transactional time with regard to checking and approving e-commerce orders; and additional revenues gained from selling Web advertising and/or preferred placement within the program’s product search results.

Budgeting is also important because it allows management the tools to increase and decrease budgets depending on economic and other environmental circumstances.  During our next discussion we will speak directly about reducing costs.

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Operating expenditures

As with the startup expenditures, the operating expenditures involve employee time. The e-commerce manager, MIS, programmers, graphics people, and customer service representatives must all be involved on the operational side of an e-business. Further telecommunication expenses are incurred monthly or quarterly, as well as basic utility expenses. 

Advertising also comes into play on the operational side of an e-business. Literature and other ‘hard’ advertising pieces must be created. Pay-per-click advertising and e-marketplaces should be advertised in so that horizontal partners push users to your site.  ABC may also wish to conduct live web demonstrations of its capabilities. This per-month resource must be budgeted.

While some business costs can be reduced in the e-business environment, it is more accurate to say that money can be spent more wisely after e-business implementation as a result of better reporting, trends data, and better accountability for marketing dollars spent versus true customer acquisition, ROI and lifecycle earnings from a customer.

The budgeting process is just as important in the e-business environment, so we will discuss budgeting in the next post.

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It is estimated that only 25 percent of companies incorporate predictive metrics in their plans. This means that 75 percent of decision-making is based on lagging indicators. This is a sobering statistic when it comes to financial planning. A financial plan needs to incorporate past figures and expected future results. Without both, considerations regarding future expenditures, profits and goals cannot be met. With this being said, the first thing that a company should do when creating a financial plan is to think ahead in a strategic way. That is to say, one must look at costs in an encompassing way. That is to say, one should consider startup expenses, operating expenses, cost-reduction techniques and budgeting. Let us begin with startup expenses. This should also be considered the beginning of a draft outline in regard to a financial plan for ABC Co.  Next time we will talk about the costs associated with starting an e-business enabled company.

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