Budget, it’s not a four-letter word, but to some people, it may as well be. We work hard gathering the expected and unexpected costs of running a business, add in potential income, and create a budget. Then only to struggle (and most often fail) to adhere to it.
If this sounds like you, you are not alone. The big questions are these; Why is it so hard to stick to it? Why do most people/businesses spend all the time creating one, only to not follow it? And the most important question; What should we do differently to get budgeting success?
Why is it so hard to stick to a budget?
When we narrow it down, there are three main reasons budgets can be difficult to follow;
- The daily or weekly tracking of expenses and deposits
- Making reasonable and necessary adjustments
- Accuracy in the numbers
Recognizing the problem is half the battle. So now we know where the issues arise from, so let’s do some work to solve the problem areas.
Start with a Better Budget
Identify Business Goals
The first place to begin is by identifying your business goals. When you know where you want to go, it is easier to know where to start. Check out this blog post if you need help setting some business goals.
Review Past Documents
Next, take a look back at your documents, a Profit and Loss Report, and income statement, bank statements, past tax returns, you get the idea. Don’t just guess what the numbers are, actually find them.
Let’s start with a realistic budget. Not a budget of what you “wish” or “hope” your business can reach. Let’s go back to reviewing past documents to start with real numbers. When setting budget amounts, be conservative with your income amounts, this will help you save some for a rainy day. We have all heard the phrase “expect the unexpected.” So be sure and budget for it as well. It’s essential to be flexible as well; all the planning and budgeting can only go so far. Don’t be afraid to change things along the way.
The best budget is one that has the correct and up to date information. Otherwise, it is useless information. By tracking your expenses and income regularly, your chances of having accurate, useful information increase significantly.
Tracking income and expenses weekly will help you;
Pinpoint your spending habits
You will discover good practices that you can learn and expand on. It will also find those pain point areas where spending is high. Finding bad habits quickly before they get out of hand will save a massive headache later.
Pinpoint highest and lowest income sources
Finding out who or what generates most of your income is highly valuable information. Is it a specific client or a particular product? This information will help you predict future income as well.
Create accurate numbers for future budgets
When you know your numbers are correct, and up to date, you can use them for your next year’s budget. It creates a baseline for income and expenses.
Make adjustments along the way to avoid miscalculations
When you are continually updating and adjusting your budget, you are catching potential problems before they arise. Being flexible is part of working in a budget.
Get Help and Support from Others
As a business owner, the weight of sticking to a budget doesn’t fall solely on your shoulders. For success, get everyone on board!
It takes a village
Don’t be afraid to involve team members from the beginning stages of creating a budget. Including others creates a team feeling which will, in turn, encourage participation in sticking to the numbers. Getting input from different departments, managers will ensure proper budget amounts. They are on the front lines and can make or break a budget.
Find Outside Help
Sometimes hiring a professional bookkeeper or accountant is the best move for a business. If numbers are just not your thing, spending the money now for help may end up saving your business money and heartache in the long run. Help can include a person or an accounting/budgeting software.
The word budget doesn’t have to be a scary word. It can be the road map your business follows to create fantastic success! Use the start of 2020 to be your jumping-off point to create and stick to a business budget.
Comment below with any secrets you have found to develop and stick with your budget.