Budgeting is a process that can take up time, bring forward difficult decisions and cause anxiety. So, why would anyone put themselves through that? Because it’s worth it! Put simply, businesses that use budgets make more money.
Why some people don’t prepare budgets
There are lots of reasons not to prepare a budget for your business. Here are some of the most common rationalisations:
- We don’t have time to prepare budgets
- We don’t know what our sales are going to be so it’s just pointless
- We’ve never done one in the past and we’re still here
- We did it once and it made no difference
- We don’t know how to prepare budgets
- Our business doesn’t change from year to year so we don’t need them
How successful businesses use budgets
Successful businesses, including listed companies, see budgets as a vital part of their business. They use budgets and the budgeting process itself to:
- Create incentives for good performance
- Build a better understanding of the critical success factors
- Allow effective delegation of responsibility to free up time
- Communicate clear performance expectations
- Create accountability within their business
- Create internal benchmarks against which they can measure progress and success
- Create an early-warning system if things start to get off track
- Plan investments and capital expenditure
- Plan cash and other funding requirements
- Provide important perspective – even a strongly performing business may be under-performing against what it should be doing
No business can afford to do without budgets. And the process of budgeting doesn’t need to be painful. If you’re interested but not sure how to go about it, don’t be afraid to ask for help. You’ll make more money and you’ll be glad you did.
TIPS FROM THE TEAM:
- Small businesses that don’t prepare formal budgets are destined to remain small.
- To be successful businesses need to plan ahead. Be sure to include budgets as a vital part of that planning.
- You do have to spend money to make money – so allow a budget for marketing. Smart marketing can have an immediate impact on sales and is an investment in your future.
FOR ASSISTANCE WITH BUDGETING PLEASE CONTACT OUR OFFICE ON 1300 656 141