Many small businesses are so busy selling and delivering their products and services, they don’t have the time to develop or monitor a budget. Others don’t have the desire or see any benefit.
We have heard comments like:
“My business changes so frequently, a budget we create in December for next year is useless by March.”
“Budgeting takes too much time away from selling.”
“I work from my gut to make decisions, a budget can’t help me.”
None of these statements need to be true. In fact, our clients who’ve taken the leap into the budgeting pool, now say, “I can’t believe we ever functioned without a budget”.
Done right, developing a budget for your business will yield many benefits. The 4 most compelling benefits for a small business are:
Improved Clarity and Focus on Goals
Developing a budget necessitates defining your business goals. Often, owners can articulate their business goals if asked, but their employees cannot. A budget clearly states the business goals. This can serve as a useful performance management tool by aligning the activities and tasks performed by you and your employees to the company goals.
Flexibility
A rolling budget is a tool we often use with our clients. It lets you track your business’ performance throughout the year, allowing you to make necessary changes to rein in costs or increase spending to take advantage of growth opportunities. For example, if you determine that your marketing strategy is gaining traction, a budget will let you know if you have funds available to increase your marketing investment to grow your sales. If your sales are slow, a budget identifies areas where you can cut discretionary costs to make you more competitive or tide you through slow periods.
Better Decision Making
Decisions can now be based on sound and verifiable information, versus “gut” instincts. Planning for sales, expenses, cash flow and capital purchases, drives an objective vetting of the institutional beliefs present within any business. By setting targets on paper, it makes it more real and holds stakeholders accountable for results.
Continuous Improvement
Regular monitoring of how budgets and forecasts are proving out, creates a culture of continuous improvement. When a budget is not being met in a given area, seeing that deficiency in black and white, makes it hard to ignore the proverbial “white elephant in the room”. Resources can then be allocated to the areas that are most critical to achieving your goals.
The bottom line is budgeting is a valuable and necessary tool for small businesses to succeed and grow. For more information about creating and managing a budget, contact Barba & Associates by clicking here and filling out our contact form. We can help you gain control of your business finances.
