With 2014 winding down, now is the best time to start planning for 2015 in your business. Building a budget is a good way to plan for the upcoming year. The budgeting process can help map out how you plan on achieving your financial goals. It also forces you to take a hard look at your expense structure to determine whether all expenses are necessary. Most people don’t hop in their car and just drive – they have a destination in mind. Budgeting is determining your destination and planning how to get there.
The budgeting process isn’t as complex as it seems – we’ll often times set up the framework in Excel and ask our clients to contribute some key projected financial information while we combine some historical financial data to build the budget. To be successful, it’s important to set time aside when you won’t be interrupted to work on your budget and plan for next year. Having someone guide you through the budgeting process can make it less stressful and provides a different perspective to issues that a business may not recognize initially.
Common obstacles to building a budget are:
- Fear – businesses building budgets are oftentimes fearful of the time commitment, familiarity and avoidance to change. One thing to keep in mind is that a budget doesn’t have to be perfect. Just building a budget will give you an immense amount of insight into your business and what it takes to be financially successful.
- Completeness – budgeting isn’t just for revenues. Budgets are built on revenues and all the underlying expenses (e.g. cost of goods sold, advertising, wages, general & administrative expenses).
- Value – often times budgeting is viewed as a waste of time. The benefit you get from budgeting directly correlates to the amount of effort you put into it. In my experience, business owners that take the time to budget and plan things out are often times more successful.
Once a monthly budget is developed, the information can be entered into your accounting system and Actual vs. Budget reports can be run on a monthly basis to see how you are comparing to your budget. Identifying the departures from your budget helps you make timely adjustments so you can continue to reach your financial goals.
Setting aside time right now to plan for 2015 may have a huge impact on your success in 2015. If you haven’t done budgeting before, give it a try for 2015. I promise you won’t regret it.