Big Budget Fails!
Most business owners understand the benefit of writing even the most rudimentary business plan so why do they ignore the benefits of budgeting?
There’s often a misconception that budgets constrain good business. You’ve heard the phrase ‘we can’t do that there’s no money in the budget’ Or ‘I’m not setting a budget because it’s out of date as soon as the ink dries’.
Both perhaps valid comments but they miss the fundamental point of budgeting which is… to come up with meaningful numbers you’re forced to analyse your business in depth.
A budget is not a financial forecast it is a plan of action
A good budget starts with the question “what do we want to achieve, and what will we need to do to get there” When you understand your goal and your actions, the financial forecast is the consequence not the beginning.
The financial forecast says this is what the answer will be when we achieve our goal and complete our actions.
Any assumptions made can’t just be wishful thinking…they follow a long hard look at your business, detailing what is working and what is not.
That way the forecast is a natural consequence of the completion of those actions. Remember plans without actions are just dreams.
Don’t let it gather dust!
Your budget is a living breathing thing that should be constantly reviewed. If you’re going to achieve its action points you need a clear process to regularly check in on them. You should include the budget forecast in your monthly management accounts pack, so variances become very quickly apparent. Think of it as a road map showing you what you expect to be doing and the outcomes. It allows you to compare where you want to be with where you actually are.
Get everyone involved
If you want your team to engage with the budget make sure they understand what you’re trying to achieve and where they fit in. They will have valuable contributions to make and understanding where their piece of the jigsaw fits is a very powerful motivator. Let them understand the action plan and what actions they can contribution to achieve that goal.
Remember…. Together Everyone Achieves More!
There’s so much more I can share with you on budgeting get in touch if you want to talk.
Developing your budget with you is just one of the many ways The Outsourced Finance Department can help you.