Business Budget Plan - A Budget Is So Much More Than Just A Financial Plan!
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A Budget Is So Much More Than Just A Financial Plan!
Every time I tell a client that he needs to prepare a budget, I know the reaction will be a groan. "All that work and what good does it do?" My response is equally predictable, "If you think that, you are neither doing it right or using it right."
By: Michael Davel Anderson
Every time I tell a client that he needs to prepare a budget, I know the reaction will be a groan. "All that work and what good does it do?" My response is equally predictable, "If you think that, you are neither doing it right or using it right."
By: Michael Davel Anderson
Certainly preparing a budget takes a little work, but done right it is not a major chore, and the benefits are enormous. The way I suggest you attack a budget is to look on it as a statement of what you want your business to do. I mean, that is what it is all about really, you are in business because you want to achieve something, more wealth, more independence, more security. So you create a plan that gives you what you want. In creating this plan, you start to generate an enormous wealth of information. Information like, "What must my gross margin be?", "How much business must I do before I make a profit?" and "How much capital do I need?". This kind of information is invaluable in helping you make the right decisions day to day.
Perhaps the most important aspect of having a budget is that you know if you are on track to achieve what you want, and you don't have to wait till your accountant gets involved in April next year. By preparing budget versus actual reports which most accounting software like QuickBooks will do automatically, you can determine not only whether things are on track, but also what is causing the problem if you are not. This ensures that you have the capability to take corrective action, and to do so by attacking the correct problem.
With all the benefits I have listed above you would think it was a slam dunk and no-one would operate without a budget. And I think the case is well proven, but the best part is that the benefits given are just the beginning. Used correctly, the budget becomes a major part of your management process, and is a key element in defining goals and objectives for your people. In so doing it is laying the groundwork for the holy grail of personnel attitudes, accountability.
Simplified, the management process comes down to four steps:
·Tell your people what you expect them to do;
·Measure their performance;
·Give them feedback on their achievements, both good and bad; and
·Reward them or discipline them as the case may be dependent on that performance.
Think about it! Having a budget and using it as an integral part of your management process achieves each of the above three first steps and gives you, the owner, the tools to complete the fourth. Makes it a no-brainer doesn't it!
Perhaps the most important aspect of having a budget is that you know if you are on track to achieve what you want, and you don't have to wait till your accountant gets involved in April next year. By preparing budget versus actual reports which most accounting software like QuickBooks will do automatically, you can determine not only whether things are on track, but also what is causing the problem if you are not. This ensures that you have the capability to take corrective action, and to do so by attacking the correct problem.
With all the benefits I have listed above you would think it was a slam dunk and no-one would operate without a budget. And I think the case is well proven, but the best part is that the benefits given are just the beginning. Used correctly, the budget becomes a major part of your management process, and is a key element in defining goals and objectives for your people. In so doing it is laying the groundwork for the holy grail of personnel attitudes, accountability.
Simplified, the management process comes down to four steps:
·Tell your people what you expect them to do;
·Measure their performance;
·Give them feedback on their achievements, both good and bad; and
·Reward them or discipline them as the case may be dependent on that performance.
Think about it! Having a budget and using it as an integral part of your management process achieves each of the above three first steps and gives you, the owner, the tools to complete the fourth. Makes it a no-brainer doesn't it!
With 45 years of experience in leading positions in business across North America and internationally, Mike Anderson knows the business of business. More important, he has learned how to teach it. He is now consulting to small and medium sized companies, specializing in CEO and senior management training. Please Visit www.trainmetobeaceo.blogspot.com
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