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. Learn more in this week’s blog.
In your business, you want to make money. But in order to achieve your high hopes for a profitable year, you have to have an implementation plan. In business, an implementation plan for your profitability is your budget. Here are 4 tips that will help you with your business budget planning in the New Year.
1. KEEP your process simple.
Keeping your process simple helps you in a number of ways. You are more likely to complete a simple process than a complicated one. Simple processes help you fight the “when am I going to have time to implement this new process” thoughts that come to many busy people. Just by beginning, you overcome the temptation to start tomorrow. When tomorrow gets here, it is today. Creating a budget is not a complicated process. You are just making projections on what you are already doing. When you approach it from that point of view, it takes away the fear of the unknown. You know your business, preparing a budget is just taking what you are doing and writing down projections so you have a plan for where you are going.
2. MAKE your process repeatable.
A process does not do you any good if you can’t replicate it. Take notes if you need to so that you have your process documented. The next time you need to use that process, you can use your notes to repeat the process. Don’t forget the last point of keeping it simple. It is always easier to use a documented procedure than to come up with a new one every time you need to perform the process.
A year may not seem like a long time for remembering what you did to prepare your budget, but you don’t have the advantage of regular repetition to build a budgeting 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.
3. FOCUS on the important aspects of your business in your budget.
While you need to be complete when you are preparing your budget, the level of detail and the amount of time you spend on each area should be directly related to how important that area is to your business.
Spend the most time on areas that 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 need 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. Manage them on a day to day basis. Doing an analysis on these low spending areas will cost you more than any savings you can generate from that analysis.
4. THINK about your numbers
When you are working on your budget, remember to THINK about the numbers you are putting in your budget. Do the numbers make sense compared with what you are currently achieving? Have you included every source of revenue and expense that you have?
Look at your current P&L report (income statement, profit and loss statement) to make sure you haven’t forgotten to include any areas. If you mechanically complete your budget, it won’t be as helpful as a budget you thoughtfully prepare.
When you think you are finished with your entire budget, give yourself a break from working on the budget before finalizing it. Often you can get over focused on a specific area and lose track of something else that you should have included.
By stepping away and coming back to finalize your budget, you can treat it as a report you are reading and look at it critically. This will help you pick up areas you may have missed and give you an opportunity to fix those areas. Taking that extra time to review your budget will help you ensure your budget is well prepared so it reflects what you are actually doing. That will give you a plan that will help you achieve your goals for the year!
While budgeting may seem to be complex and hard to understand, if you use these tips, you can create a budget that will be a useful tool for your business. This will help you achieve your goals and stay on track for the year!
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God Bless your week!