Setting and following a business budget can seem like a difficult task. Many business owners cringe at the thought of creating (and following) a business budget due to a sense of fear. It’s a common problem that confronts many entrepreneurs. It’s also not too different than common personal habits such as procrastination and denial.
As a small business owner, you may feel that if you look too closely at your business budget, you may not like what you see. That is the fear factor. Now we can all agree that this is an irrational and unprofessional way to run your business, right? The truth is, a lot of owners fall into the trap.
Most people will put-off responsibility and try to ignore difficult situations, it’s natural. However, in business, the consequences of ignoring or delaying the implementation of practical fiscal controls can be dangerous to the health of your business.
Yet, like other bad habits, a little discipline and organization can make the difference whether you become a business failure statistic, or you survive and thrive.
Recognize the Problem
The first step toward recovery is recognizing there is a problem. If you look at your financial statements and see that you have more expenses than income, have no clue what those expenses are, or worse yet have no clue how to read your income statement, there is a problem.
If you can’t get your hands around the money, can’t tell where it is going, or even where it is coming from exactly, it is time to tame that budget and get it under control.
Often, business owners may not realize that they are overspending simply because of the absence of a budget. Taking the first look to see the harsh reality of where your business stands fiscally is usually the hardest part. Once you get a solid picture of what you can spend, you may find yourself also making better decisions on your purchases.
Digging into the ins and outs of a budget is not for the faint of heart. Once you start you may realize you really can’t do it on your own. It can be difficult and time consuming to track expenses, make changes, and create a new budget within the framework of how your business is already working.
There are a couple of options for this:
- You could have your bookkeeper do it, or hire a bookkeeper if you have been doing it yourself.
- Use book-keeping software to track budgets and expenses. Quickbooks is a very popular and relatively easy software program to learn. There are other software and SAAS applications, but this one is by far the most popular. They offer extensive online and live support.
- The other option is to hire a CPA for the job. You may already have a CPA for tax purposes, but ideally they will not be the one to dig into the budget. In fact, depending on the situation, it may actually be against best practices, or even illegal, for them to do so.
The best option is to hire an independent CPA to take a look at your financials, trace the money, and offer suggestions for changes. Have them work with your financial staff, or work with them yourself is there is no staff. Then, they can help you set up a budget that creates promise and future for your business.
Not having a budget, or having a budget you do not understand, is like not being able to see the road while driving a car. You are driving blind.
Goals can include reducing certain expenses by a set amount or percent, increasing sales over a certain period of time, or simply coming out of the year within your new budget. Whatever the goals may be, they must be realistic and measurable, and you must have plan to achieve them.
Once you have your new, tamed budget, goals in place, and a plan to reach them, you can move forward with your eyes wide open. This will help you to have a clear vision of business success, and allow you to better grow your business to its full potential.
There are so many online resources to learn about the benefits of creating a business budget. The University of Michigan has a helpful business budget training guide that’s free.
Most business owners see business budgets as a chore. In reality, creating and following a sensible business budget is a business asset that can help your business succeed. Like most advice, business budgeting is only helpful if you put the effort into it.
You can’t possibly follow all business advice you will get as a business owner, but creating a budget should be in your top 5 most important things to do.
In addition to writing about the financial markets, Mr. Kelly writes extensively about digital marketing and SEO.
Mr. Kelly attended Boston College where he studied English Literature and Economics, and also attended the University of Siena, Italy where he studied studio art.
Mr. Kelly has been a decades-long community volunteer in his hometown of Long Island where he established the community assistance foundation, Kelly's Heroes. He has also been a coach of Youth Lacrosse for over 10 years. Prior to volunteering in youth sports, Mr. Kelly was involved in the Inner City Scholarship program administered by the Archdiocese of New York.
Before creating ForexTV, Mr, Kelly was Sr. VP Global Marketing for Bridge Information Systems, the world’s second largest financial market data vendor. Prior to Bridge, Mr. Kelly was a team leader of Media at Bloomberg Financial Markets, where he created Bloomberg Personal Magazine.
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