When business owners confront the thought of business budgeting, they may think, “Oh no! That sounds tedious and difficult.” Or, “Why bother? I can run my business without one.” Whatever the feelings, here’s a simple truth spoken by Winston Churchill who said, “He who fails to plan is planning to fail.”
Business Budgeting—What and Why?
A budget is simply a plan that provides the means to organize and direct an organization’s financial goals. Think of it as a key part of the business’ action plan.
Creating and using a budget helps management to think longer term compared to the daily management tasks. It provides substantial measuring points to know the financial position of the business and how to make necessary improvements.
6 Great Business Budgeting Principles and Practices
- Start with an overall business plan, including key business goals and strategies to meet those goals. The budget then provides the financial framework to accomplish your plan.
- Business budgeting needs to be a formal process, not an informal ‘back of the napkin’ list of things that may or may not happen.
- Involve your team members in the planning process. That will increase the quality of the planning because you will get those closest to the operation to provide their input. It will also improve the outcome of their efforts as they have ‘buy-in’ to achieve the budget.
- Don’t be overly optimistic on revenue projections. Understand the seasonality of revenues and consider any possible shortfall conditions.
- Don’t under forecast expenses. Make sure you have some “cushion” for any unanticipated changes in expenses. Track expenses carefully to avoid unpleasant surprises.
- Review your budgeting results frequently.
3 Characteristics of Good Business Budgeting
- Realistic numbers, not bravado.
- Business budgeting is intended to be a tool but not an iron hammer.
- Action-oriented. Make it useful.
Get Professional Assistance
As you implement your planning and business budgeting process, seek professional assistance with your financing. Prime Wealth Development has the passion and expertise to help you achieve success.
