• Jamie Skinner

Budgets, They’re Not Just for the Birds!

I was reading a fellow blogger’s post this morning about how business owners learn the hard way that budgets are the secret to survival. At the bottom of Belisle’s post, he states “Lesson learned: Budgeting is a waste of time only if you don’t plan on making money!” And I couldn’t agree more!

I then wandered over to Forbes to look for some blogging inspiration and the quote of the day was “A goal without a plan is just a wish.” This pretty much ties into Belisle’s post, so now I feel I must address my own opinion on the matter.

Once again, I may surprise you when I say that I love budgeting! To me, the budget process unveils a lot about a company’s story: where they’ve been, where they are, and where they see themselves going. I’m sure a budget to most just looks like a bunch of numbers in a spreadsheet, but I assure you there really is a story lurking beneath the numbers. It’s packed with insight!

For companies that have never created a budget, the task can seem daunting. It can be difficult figuring out how to start one, so I advise you to start by looking at historical data, if you have any. From there, look at one revenue or expense account at time and really think about what influences the outcome of those numbers.

For instance, are you just throwing a sales number out there because it sounds like a number investors would like? Or are you considering what sales would actually be attainable but still a challenging goal to inspire your sales team? Also, depending on what sales you budget, are you considering how the sales volume might directly influence expenses? Aside from overhead expenses that do not vary, some expenses will increase will increased sales. Departments are destined to go over budgeted expenses if volume changes are not taken into account (this is where a rolling forecast can come in handy for volumes that are susceptible to constant change).

It is always surprising to me when I’ve been tasked with budgeting in a corporate position and there is very little backup for how the budget was formed. The more detail you can incorporate into a budget, the better. That is the only way you will truly be able to understand variants later on when looking at why actuals deviated from the budget.

A budget is a critical elemental in making a plan to reach your business goals. Without one, you are pretty much blindly navigating a massive ship in an expansive open ocean. Where will you end up? Anywhere. Is it the place you want to be? Maybe, but likely not.

If you’d like help implementing a budgetary plan to reach your goals, let’s set up a consultation to see what can be accomplished! Email me at jamie@renoaccountingsolutions.com.

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