Do You Have of Business but Not a Budget?
If you own your own business, no doubt the end of the year brings you not just the holidays, but a lot of work to complete. You’re probably thinking about wrapping up the books, selling any investments, organizing documentation for your taxes, setting your employees’ benefits up, and creating your budgets for next year.
When your list is particularly long, one specific task might seem to loom quite large. If this happens, it’s likely that you procrastinate. And one particular area of procrastination is the budget. In fact, many business owners are so determined to avoid putting together their budgets that they’ll do just about anything to push it under the rug.
Here are some of the more common excuses, as well as the reasons they just don’t fly:
Excuse 1: Budgets aren’t flexible enough, so that it’s impossible to stay with initial limits for the entire year. In fact, your budget doesn’t have to be cut and dried. You didn’t swear on your grandmother’s best brownies that you’d stick with it no matter what. It’s yours and if needed, you can be flexible with it. However, you should not just make a budget and then ignore it. It’s estimated that up to 80% of companies who create budgets don’t change even one detail during the fiscal year. In fact, that’s not realistic. Not only is it possible for you to change your budget as circumstances require, but it’s necessary. If appropriate, perhaps budgeting every quarter instead of yearly would be a better option for you.
Excuse 2: If I have a budget, I can’t be as flexible in the event of a crisis. In fact, if you have a budget in place, you’ll tend to be more proactive and flexible, not less. This is because a budget can help you foresee problems and take steps to stop them, sometimes before they even actually occur. Or, if problems do occur, you can probably catch them earlier while still small and therefore much more fixable, before they become full-blown crises.
Excuse 3: It’s too complicated to go through setting up a budget. In fact, this is a reality for many companies, but it doesn’t have to be true. Even though many companies spend a lot of time sweating over their budgets and may even devote as much as 20% of their management’s time to budget creation, this just doesn’t have to be true. It’s true that a certain level of detail is necessary in order for budgets to be effective. However, budgets can be pretty simple and still function just fine. Whatever time you invest in planning your budget, it’s not wasted. You’ll save time by being prepared for what may come up down the road because you’ve got a budget; when the time comes for you to make a decision on the spur of the moment, you’ll know what to do, because you took the time to prepare.
Excuse 4: My industry changes too quickly for me to adhere to a budget. In fact, every company experiences this, because conditions change moment to moment in every industry, not just yours. Therefore, that’s not a legitimate reason to avoid this necessary plan for the future. Your budget does not ask you to predict things you can’t know, such as whether fuel prices will go up, whether staff turnover will be high, whether laws will be passed that will impact your business, and so on. Rather, a budget forces you to look at the overall picture and make a commitment to goals you want to accomplish, along with the actions you plan to take to do just that. These things are under your control, regardless of changes in your industry. You need to be able to look at your business and know what you want to accomplish in the next 12 months. If you can’t do that, you need to figure out why.
Excuse 5: Budgets don’t mean anything. Everyone just creates the numbers they want so that the picture they paint is perfect. It’s true that if you construct your budget based on unrealistic terms and goals in hopes of inspiring yourself to actually reach them, in fact this is a sure way to invite frustration and failure into your life. In fact, one Internet post compared budgets to pornography, saying that they were a fantasy based on what the author wanted the world to look like but with no connection to reality, and “designed to titillate, stimulate and motivate the reader, but ultimately resulting in a sense of alienation and despair.” If this is your intention when you set up your budget, it’s of no use to you. To help you, your budget needs to be based on reality.
Excuse 6: I have a budget, it’s just in my head not on paper. Keeping mental note of your company’s projects, numbers and expenses is overambitious. You may be able to do it for a while, but eventually your business reaches a size that makes it impossible for you to keep in touch with all of the details. If you have managers and employees working for you, it also prevents them from taking on some of the ownership and accountability for results with you. Even if you don’t feel like you’re big enough for a budget right now you will be one day. It’s never too early to start a good habit.
Remember that in reality, a budget is just a plan. It makes you step out of your everyday business view and forces you to look at the big picture strategically, so that you have to take note of where you are now and plan for where you want to go. Without a formal plan to help inspire you to action, planning a budget will likely be pushed to the back burner as you spend all of your time managing daily fires to be put out.
What will it be, then? Did your budget get put down your garbage disposal by accident? Do you need to paint your nails so that you won’t have time? Did your uncle come in from San Diego to visit? Or are you ready to quit making excuses and get to work on those numbers?
Tags: Business