Mention the word budget to most business owners, and instantly their hands become clammy. Budgets often get a bad rap because planning one can be a tedious task. However, the benefits of a budget, far out-weigh, the dread many associate with the word. A budget is an essential tool for every business: big and small. In simplistic terms, a budget is a projection of revenues and expenses in a future period. Budgets serve as a ‘blueprint’ and aid in the success and growth of a business.
Goal Setting
Goal setting assists in achieving success and growth for your business. It is important to have long and short-term goals. Creating a budget can help you reach the goals you envision for your business. Budgets can also help you focus on your business’ goals. It is common for business owners to get caught up in the daily grind, forgetting about the big picture. Often leading to inefficiencies in resource usage. Reviewing your budget regularly allows you to ensure your business is on track to meet its goals.
Measuring Performance
Budgets can measure the performance of a business. Comparing a current budget to previous data can be a great way to track your business’ performance. These comparisons tend to make trends more visible. Often indicating areas needing improvement. Identifying areas of improvement allows business owners to find and implement solutions. Ultimately, helping a business to optimize its efficiency.
Decision Making
The decisions you make daily as a business owner affect the success of your business. Having a budget in place helps prepare you to make important decisions. It provides you with knowledge of the ‘ins and outs’ of your business. For example, an employee wants to attend a conference to develop their skills. Having a budget in place allows you to readily know whether this request is feasible or not.
Budgets are a great tool for businesses to use. The thought of creating one may seem like a daunting task, but it does not have to be. Cheryl Jefferson & Associates is available to assist you with your budget needs.
Originally written by Jamie M. Shryock, CPA
Updated and additional content provided by Elizabeth Partlow