No, a budget isn’t a type of bird! Budgeting is an absolutely necessary component for any business large or small, new or old. It doesn’t have to be a stumbling block, instead it’s a useful tool, like, say Google maps, to keep us going in the right direction. Yes, it’s tempting to steer off track – who doesn’t love a little detour? But if you want to get to your destination, i.e. not overspend, then a budget is your map to stay on course.
Put simply, your budget is determined at the start of the fiscal year and is based on previous results. It considers your goals for the year and what direction you want to go. It’s important to check in with your budget every month to ensure your spending is within the parameter of what you set. Your budget should stand firm, nothing but something extraordinary should budge it. Ah, hello COVID, you extraordinary beast… Pandemics, along with recessions, expansions, contractions and so on are the exceptions to the rule.
A budgeting for small businesses, or even large, is usually a team effort. Sticking with the Google maps analogy for a moment; you review last year’s trip and you’d like to shake things up this year. The family outlines what they’d like to see and how much time each stop would add to the journey. You can budget what gas you need for the journey and arrange the route based on this info. To go off the map might result in an empty tank half way and no money to fill it. And so it is in business; the budget keeps the business running smoothly and getting to where you want it to go. Management and executive compensation is often based on the budget.
Budgeting services might be a good avenue for you to explore if you are hesitant on your ability to plan and adhere appropriately. Luckily, we know some cool cats ready to help, just head over to our CFO services page for more information.