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Budgeting? Why in the world would you need  budgeting ideas, especially in your business?  You put a little away here and there and all is good.  Right? 

Well what happens if your business model begins to change and suddenly there isn’t enough money put away to make those changes and you don't know what to do?  Having an idea of how your budget is working could save your business

What is Budgeting?

When we start a business the first thing that you should have done is create a business plan.  Your business plan is your map to success, showing where you want to go and allowing you to evaluate how far you have come.

Within that business plan you should also have a budget.  This budget becomes an important part of your planning.   This is where your objectives are determined and your future sales, expenses and cash flow is forecasted.  Needless to say they guide purchasing, scheduling, your personnel and all your financing activities. 

Okay, this is guess work at it’s finest but it should be an educated guess at that, based on your business plan.  When something unexpected happens you will be better able to evaluated the situation, plan some more and readjust your forecasts.

Why a Budgeting System?

Above I stated some simple facts of why you need a budget.  But here are the Tips on Budgeting that will bring your business clarity.

1. Help you in getting to know your business.  When you are looking at creating a budget you begin to look at every aspect of your business, allowing you to know it very well.  Having this focus and knowing the limitations of your business allows you to see opportunities easier and to see when changes are coming.
2. You will be better prepared.  Knowing your business well will help you become proactive rather than reactive in the event of major changes.  There is no possible way to know all the challenges your business could face, but having the budget intact and knowing your business well will help you to the best action.
3. You will see opportunities easier.  This budgeting process will help you see more into the future than just focusing on the day to day operation.  You will be more focused on increasing productivity, creating new products, reducing your costs and increasing your efficiency.
4. Having a benchmark.  Without a plan or a budget it is impossible to determine success or failure.  Benchmarking gives you a flow chart that will help in your progress.
5. Budgeting will help you business move in One direction.  When building your budget you are expressing your objectives in writing, giving anyone that is working for you a clear vision of your business goals.  Many entrepreneurs have difficulty in expressing their ideas and goals to their employees allowing them to do what they believe is right when in actuality they are moving in the wrong direction. 
6. Giving everyone purpose.  If you have employees or family members working or helping you, always involve them in the budgeting process.  People want to care about their work, when you involve them they take an emotional tie to the business. 

One size does not fit all

When preparing your budget please make sure that it fits your business.  Many times budgets are done off of some predetermined form. 

Your budget should be based off of the accounting system that you are using; if you need to, make changes to the system to give you the information that you need. 

Remember –“let your planning process – not your accounting system-guide you.”

Keep your budget simple and they can be for any timeframe that you choose.  Yearly budgets are certainly the norm for most businesses but having a longer term budget helps with thinking longer term. 

Many different types of budgets

In the beginning you may want to consult your CPA in guiding you on how to set up a budget that is appropriate for your business. 

Whatever you do though, making the time to build your budget is well worth it, the benefits definitely will outweigh the time and costs. 

Don’t be Alice in Wonderland, know your benchmarks, and see the challenges ahead.  Be in business to stay in business.