Last week I talked about Put more money in your pocket - by not paying interest. If you missed that post, you can review it HERE. This week’s post is Budgets are the Owner’s responsibility, not the Accountants. Many people think that a budget is something that is your accountant’s responsibility. While the accountant may put everything together for you, in order to have a well prepared budget, you need to be the one who is responsible for what goes into that budget. Learn more in this week’s blog.
There is a big difference between a task and a responsibility. A task is something you do. A responsibility is something you have to answer for. This applies especially to budgets. Accountants will complete the task of preparing a budget. The owner has the responsibility to answer for the business results that are based upon the budget.
Now don’t misunderstand me. I am trained as accountant myself. When it comes to the task of preparing a budget, accountants are very good. They know what needs to be included. They can dig into the historical details and know how to project good numbers based on that history. When the budget doesn’t achieve the numbers, they can tell you what you can do numerically to make it work. Accountants are a great number resource. They can get the task done. What they can’t do for you is be responsible for the results.
As an owner, your budget needs to be more than a completed task. You know (or should know) what items are important to completing the vision for your company. When there are decisions that need to be made, your accountant can tell you numerically what the answer is to a problem, but often cannot tell you the effect that the numerical answer has on the vision. Sometimes the right answer is not necessarily the number that seems to make sense numerically.
Let me give you an example. When I was a new accountant, I was volunteering at a non-profit daycare center helping with the bookkeeping. The center was having enrollment issues and was looking to trim expenses. Looking from a numerical, non-responsible position, I suggested that advertising was an area that they could cut back on. Fortunately, there were other more experienced people working with the center that recognized that that was not a good place to cut when you want to increase enrollment. I was looking numerically, but not thinking about the vision of having a full center.
That example can also apply to your business. The accountant can prepare a perfectly balanced budget that numerically makes you hit all the numbers. But as the owner who is responsible for the business, you need to make sure that the numbers reflect the business the way that makes you achieve the vision, even if that vision is for the business to make money by serving your customers well.
Here are some tips you can use if you are having an accountant prepare your budget (or things to remember if you are preparing you own.)
- Set the parameters for the budget before the process begins.
- Identify the items that are critical to the business that you do not want to cut.
- Start early and be involved with the entire process.
- Identify areas of opportunity where you can be more effective or increase sales
- Concentrate on the big picture, but be sure to ask detailed questions on areas where your instinct tells you something is off.
- Use your accountants for what they are good with, but remember that you are responsible and that they work for you.
Follow these suggestions as you work to create a well prepared budget that helps you put more money in your pocket every month!
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Have a great week!