For some of us “Budget” is a dirty word. Budgeting has a stigma as being something that successful people don’t need to do, and so we trick ourselves into thinking that if we want to appear successful, we shouldn’t have a budget we stick to. But there are many reasons why having a budget for your business will actually make you successful. Here we will explore just four of those reasons.
A well-structured budget tells you what you CAN spend
Most of us think on budgets in very restrictive and limiting terms, but on the flip side we can see that a budget actually tells us what we CAN spend on each item. For example, how many times have you found yourself in need of a new piece of equipment, but you are unable to make the purchase because you have already spent too much money that quarter or month, and your account balance is too low. Having a budget and sticking to it helps ensure that you will have the funds available when you need to invest in new equipment, or advertising, etc.
Budgeting helps you prepare for periods of slower sales
Whether you have been in business for years, or you are just getting started you no doubt have recognized that sales volume is not always steady. There will inevitably be slower times and a budget can help you prepare for those times. If you are like most business owners you probably spend more money when you have it, and find yourself panicking when you don’t. A budget can help you reign in that spending in the more lucrative months so that you have ample cash reserves in the slower times to help get you through.
Budgeting lowers financial stress
Like we just mentioned, the ups and downs of sales and cash flow can often lead to low bank balances, overdrawn accounts, layoffs etc. All of these financial crisis moments contribute significantly to the everyday stresses that entrepreneurs and business owners deal with daily. Just like Budgeting can help you smoothly pass through slower sales periods, it can also help reduce your stress by eliminating the day to day “I wonder if we have enough cash to make it?” questions. The key here is to stick to the budget, if you create it and then do nothing to ensure you adhere to it in all of your purchasing then nothing will change.
A good budget ensures you can deliver on your promises and commitments
Have you ever promised yourself, or maybe even your employees a bonus and then at the end of the year found you couldn’t deliver? OR perhaps you were late on a project because your cash flow was too slow to purchase the supplies and materials you needed. These instances can be embarrassing and very damaging to your credibility as a business owner and employer. Just like with each of our other examples, budgeting appropriately will allow you to maintain your financial and even time commitments. You must adopt an attitude that says, “If it’s not in the budget it doesn’t happen” as well as the opposite approach which is “If it’s in the budget we do whatever it takes to make it happen”. Follow through is vital to maintaining your integrity as a business owner, and budgeting can help make that happen.
Don’t get caught in the trap that says budgets are just for unsuccessful people, or that they don’t belong in your business’s financials. Use a budget in your business to help you reach your financial goals, ensure that you are spending money where you really need and want to be investing it, ride out the slow periods without panicking, minimize your financial stress, and help you follow through on your promises.