As 2019 comes to a close, it is important to take a look at our progress and take steps to set ourselves up for future success. Creating a budget will help you see what the needs of your business will be in the coming year. Budget helps you track business expenses, and now much revenue you need to keep your business growing. By putting these numbers to paper, it helps you anticipate future needs, spending, profits, and therefore providing your business with a roadmap to understand where you are going with your business. It also may let you spot problems before they mushroom, so that you can switch gears.
Budget also gives you insight into how your business is performing from year to year, reveals savings opportunities that can improve performance and helps you anticipate the needed funds to purchase new equipment. It’s like being in a car without a map or GPS system. You hope you are going in the right direction, but you don’t know.
There are other reasons why a budget is important to a business. Bankers may want to see a budget when you ask for a loan. Investors may want to know how you spend your money and how you plan on growing your business before investing. Some business owners also believe that employees should also be privy to the budget so that they understand where the business is going and are motivated to work harder. They believe that business’s goal is a group goal and they can’t expect their staff to meet the business’s goal if they don’t know what they are.
Budget can also help you minimize risk to your business. If you have plans to sign a new lease or invest in new machinery or equipment, it’s better to find out whether you have the funds to commit to the new office space or the new equipment before you commit. A budget can be used to shed light on the funds needed for labor and/or materials, total start-up costs for a new business, your costs of operations, the revenues necessary to support the business and a realistic estimate of expected profits.
Once a budget is developed, it is important to use it to track actual expenditures and revenues each month so that you know whether you’re on target. If you’re missing the targets set out in your budget, you can use the budget to troubleshoot by figuring out how you can reduce expenses, increase sales by more aggressive marketing, or lowering your profit expectations.
A budget allows you to plan and adjust. It allows you to evaluate whether you can afford to hire that superstar, or to seize that attractive opportunity that could open up your business to a whole new world. Without a budget, it’s like shooting in the dark – you hope you are shooting straight but you don’t. Contact us to schedule a complimentary consultation.