I hate budgeting, and I know I’m not the only one. Most business owners do!
After all, the time you spend creating a budget is time that could be spent finding customers, making sales, delivering products, and collecting receivables, right?
If you’re anything like me, you dream of a day when you’ve got more cash in the bank than you know what to do with. Unfortunately, that’s not reality for most (if not all) businesses.
Despite my extreme dislike for budgeting, I’ve found that it’s essential for running and growing my business. Regardless of the size of your business, the industry you operate in, or your level of competition, you need a budget. Period.
With that said, all businesses budget differently. Personally, I like to keep a very detailed budget, and I’m about to give you 11 reasons why!
11 Reasons Why I Keep a Budget
Why is budgeting so important? I can think of at least 11 reasons! Here’s why I keep a detailed budget:
1. It Allows Me to Collect Receivables on Time
Doing a side-by-side comparison of the payment timeline in my budget and my receivables allows me to see what’s outstanding (and by how much).
2. It Helps Me Keep Monthly Outsourcing Clients Happy
I enter all of my monthly outsourcing clients into my budget, ensuring that we account for them and get the work done!
3. It Helps Me Track Pending Prospect Proposals and Their Potential Impact
By including pending proposals in my budget, it’s easy to calculate the amount of income they will generate and how they might impact my business overall.
4. It Allows Me to See the Impact of Prepaid Plans
Some of my customers are on prepaid plans. This is consistent monthly income that I can pencil into my budget!
5. It Helps Me Plan the Workflow of Extended Returns
Believe it or not, a CPA’s job doesn’t end after Tax Day! My budget helps me schedule out extended returns so that I’m getting them completed on time and meeting my income goals.
6. It Helps Me Estimate the Income Earned from Current Work
My budget tells me how much I’m going to earn from my current work once I complete it and bill for it.
7. It Allows Me to Compare What I Budgeted to My Actual Expenses
The amount you budget for and what you actually spend don’t always line up. Without a budget, you won’t be able to compare and correct!
8. It Helps Me Foresee Large Cash Expenses
My budget tells me when a large cash expense is coming up and how I’m going to cover it.
9. It Helps Me Find Ways to Cut Expenses
With your income and expenses in one place, it’s easy to spot costs that are inflated or unnecessary!
10. It Allows Me to Plan for Potential Cash Shortages
By showing you the wiggle room you’re working with, a budget can help you manage a future cash flow problem.
11. It Helps Me Identify New Opportunities and Calculate Their Effect
With a budget, you can plug new streams of income into your budget and see how your bottom line is impacted!
These are just a few of many reasons why I devote so much time and energy to my business’s budget. Truthfully, I don’t know how any business owner runs a profitable business without one. It’s that important!
4 Keys to an Effective Budget
Don’t have a budget? You need one! Here are four keys to creating an effective budget for your business:
1. List the Objectives of the Budget
How do you plan to use your new budget? Before creating it, write out the goals you want it to achieve!
2. Get Help Designing Your Budget
If this is your first time creating a business budget, you’ll likely need a hand. Lean on a professional accountant or bookkeeper!
3. Review and Revise Your Budget Monthly
Budgets shouldn’t be static. Reviewing your budget regularly allows you to adjust as needed.
4. Compare Actual Results Against Your Budget
Remember, if you’re not going to follow your budget, there’s no point in having one! Make a habit of comparing your actual income and expenses to what you budgeted so you can quickly course correct.