Budgeting: Your Recipe for Success

A laboratory’s budget acts as your recipe, laying out what results you want to create in profitability and what ingredients—Revenue, Cost of Goods Sold (COGS) and Selling, General & Administrative (SG&A) expenses—you’ll use to get there. Of course, quality and customer service are also mission critical.

Creating the Budget

Creating a budget can take anywhere from 30 to 60 days, shorter for labs with good, immediately available data and analytics and longer for labs without. By data and analytics, I mean your lab’s income statement, revenue mix and costs from your accounting software, customer and product mix reports as well as manufacturing statistics derived from your lab management software. (See Figure 1 below for a sample budget.)

It’s crucial to scrutinize each report and transaction log. Enlisting the help of your accountant or trusted advisor and exporting reports to Excel...