Do you have a plan?

Many people begin the New Year with resolutions for changes that they want to make for the coming year.  Unfortunately, many of those resolutions fail, in part because there is no implementation plan that goes along with the resolution.  In business, that equates to going through the year with high hopes for a profitable year, but no budget to help you get there.  Today I want give you some tips to help you prepare a budget for your business.

Keep your process simple. This is going to help you in a number of ways.  You are more likely to complete a simple process.  You won’t have to fight the “when am I going to have time for this complicated process” thoughts that come to many busy people.  Just by beginning, you overcome the temptation to start tomorrow, which never comes.  When tomorrow gets here, it is still today.  Creating a budget is not a complicated process.  You are just making projections on what you are doing already.  When you approach it from that point of view, it takes the fear of the unknown away.  You know your business, budgeting is just taking what you are doing and writing down projections so you can see where you are going.

Make your process repeatable.  Take notes if you need to so that when next year comes along, you can repeat what you did this year.  That goes right along with the last point of keeping it simple.  It is always easier to use an established procedure than to come up with a new one.  A year may not seem like a long time for remembering what you did, but you don’t have the advantage of regular repetition to build this habit.  Also, by keeping the process both simple and repeatable, you will be able to use your budget preparation time to review what you are doing with the goal of improving.  This will help you become more efficient and profitable.

Focus on the important aspects of your business in your budget.  While you need to be complete, the level of detail and the amount of time you spend on each area should be related to how important it is to your business.  You want to spend more time on areas that are going to make you money.  As you detail and make projections on these areas, you can spot inefficiencies and be looking for ways to improve.  This will help you serve your customers better and will help you create more customer loyalty and ultimately, more profit.  You also want to spend more time on big ticket items.  If you spend a lot of money in a particular expense area, you want to make sure you aren’t spending more than necessary to provide excellent customer service.  Low spending categories like office supplies can be summarized.  Typically, it is usually not worth your time to be highly detailed on low value items.  The analysis will probably cost you more than any savings you can generate.

 When you are working on your budget, remember to THINK about what you are putting down.  Do the numbers make sense?  Have you included everything?  Look at your P&L report (income statement, profit and loss statement) to make sure you haven’t forgotten any areas.  If you mechanically complete your budget, it won’t be as helpful for you as one you thoughtfully prepare.  When you get through the entire budget, it can be helpful to step away from the project before finalizing it.  Many times we get focused on a specific area and lose track of something you should have included.  By coming back to it, you can look at it as a report you are reading and look at it critically.  This will help you pick up areas you may have missed.  If your budget doesn’t reflect what you are actually doing, it will not help you.

While budgeting may seem to be complex and hard to understand, if you follow these suggestions, you are more likely to generate a budget that will be a useful tool for your business.  This will help you both get and stay on track for the year!