Budgeting is not, and never will be, an easy job. The work involves planning for the future in a highly dynamic and volatile environment. It’s impossible to know what’s going to happen and those unexpected events can throw even the most tightly planned budget into disarray.
It’s time to take a new look at the budgeting process. The simple fact of the matter is that budgets can’t be rigidly plotted because the future is not a rigid one-way track. When your financial circumstances go off the road, you need to be prepared to follow.
So, Why Budget at All?
Money, no matter how much we might wish it were otherwise, is a finite thing. You only have so much to spend, and every dollar has to be intelligently spent if your business is to achieve the goals you set for it. When you look at your budget, you can calculate how much you’ll need for each aspect of your company — marketing, supplies, and so forth, while making sure you have money for all-important things like utilities, workspace, and payroll.
Budgets not only helps you limit spending to a sustainable framework, but they build the structure for future expansion. When you begin to exceed goals and start running a surplus, it’s easy to see when you can afford to move forward on your current goal or move on to a bigger and better one. They say you’ve got to spend money to make money and that is true, in many ways. If you don’t budget enough money to get your business moving, it’s never going to go anywhere.
Smoothing Out the Bumps
Nothing can make the budgeting process perfectly flawless, at least not until someone can adequately predict everything that will happen over the course of the year. Even the best planning can’t compensate for some of the surprises that crop up during the lifetime of any business. However, there are things you can do to help make your budget a little more resilient.
Frequent Budget Reviews
You don’t have to make a new budget every month, but your budget should never be considered to be set in stone. Just take a look at it every so often, and check to make sure everything is on track. You might find too much money in one place that could be better used somewhere else. It may be that your sales are not as good (or much better) than you anticipated. You should give yourself the opportunity to adjust accordingly.
It’s Always Budgeting Time.Changing your budget doesn’t have to mean a sweeping overhaul if you budget multiple times a year. Small adjustments can make for big changes — or they might not affect anything at all. Keep an eye on things. Maybe everything is just fine. A review of your budget can be just that — a review.
Rapid Response. More frequent reviews and adjustments let you respond to those surprises that pop up from time to time. If there’s a major change in your customer base, there’s no need to wait until the end of the budgeting cycle. Your income has to change, so your budget’s going to have to change as well.
While it’s impossible to let everyone into the budgeting process in larger companies, there are still ways everyone can participate. Set your goals and make sure everyone knows what they are. Those who succeed in keeping up their part of the budget should be recognized, and those who do more than required should be recognized and rewarded, perhaps even monetarily. Make incentives part of your budgeting and forecasting process so everyone has a stake in keeping your financial situation on an even keel.
Accounting for Everything
No one can constantly make new budgets. If the updates are too frequent, it’s not a budget any longer — you’re just spending money as you feel it needs to be spent. At some point, you’re going to have to make predictions, allocate your money, and stick with it for at least a quarter to get a grasp on how your changes affect your company. Take the time to look at your competitors and see where they’re going. Look hard at your overhead costs and determine if those are going to change in the near future. See how many employees you can (or can’t) afford while still keeping the lights on. You may have to make some hard choices, but if you have properly prepared your budget, you’ll be able to see it coming and will be able to adjust accordingly.