Budgeting Essentials

Last week I talked about “How does a Financial Plan (budget) benefit a Small Business?”  If you missed that post, you can review it HERE.  This week’s post is “It is never too late to start budgeting!”  Most people think of budgeting as an end of the year activity.  But the best way to create a budget is to collect your budget information as you are going through the year.  Learn more in this week’s blog.

When most people think about budgeting, they think of a process that begins a few months before the beginning of the New Year.  Everything is gathered and compiled in one quick process.  Details are adjusted to achieve goals for the coming year.  The budget is finalized and put into the accounting software so that it can help you manage your budget.

But is that really the most efficient way to create your budget?  How good is your memory going back 9 months?  To really do a good job, you are going to have to do some digging to look at what happened in those prior months and decide if they are going to happen again next year.  Depending upon how complex your business is, this could turn into a major project.

The good news is, there is something you can do to make budget time easier.  You simply start working on the next year’s budget as soon as you are done with the prior one.  You are probably wondering how that saves time when you are compiling the budget.  Doesn’t it take more time if you are continually working on the budget?

You could easily spend more time on the budget if you use the same process every month that you use when you are compiling your budget at budget time.  But that is not what I am suggesting.  Ongoing budget work is prep work that you do when the events are fresh in your memory.  You do the research when you are already thinking about events.  You do that by making notes for the budget when the events are actually happening.

Let me give you an example.  Suppose you pay your businesses water bill on a quarterly basis.  Each quarter you get the bill, rather than just paying the bill and filing it, you take a couple moments while the bill is out to record the usage numbers and the bill amount in a spreadsheet or on a note sheet in your budget file.  You can also note any unusual events that affected the bill that would affect your next budget.  When budget time comes, your research is already done, because you did the work when you had the document out.  You don’t have to remember the unusual events, because you already noted them.

This incremental work saves a lot of time when you are creating your budget.  You have already done the research necessary to create your budget.  You have taken notes on unusual circumstances so you can account for them as you are preparing the next budget.  You save the research time that you would have had to spend doing research.  The notes help you make better estimates for the next budget.  This is a great tip for creating a well prepared budget.

Be organized as you keep your notes.  If it takes you longer to find your budget notes than it would have to do the research at budget time, you just wasted the time you spent taking the notes.  Keep the notes together in a folder, organized by category.  You could save more time by keeping the categories in the same order that you work on them at budget time. 

The folder could be a physical one or an electronic folder on your computer.  Use the medium that works best for you.  I prefer the electronic method.  This allows you to save scanned copies of any documents that you want as budget references.  If your printer doesn’t scan to a file, many smart phones now have apps that will do that for you.

Continually investing a little time on your budget on an ongoing basis will make your budget process easier and give you better information to base your budget upon.  Remember, it’s never too early to start your budgeting process!

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God Bless your week!

Last week I talked about “Good Financial Statements use Matching!”  If you missed that post, you can review it HERE.  This week’s post is “How does a Financial Plan (budget) benefit a Small Business?”  When you are running a small business, sometimes you can overestimate your memory.  Even though you are capable of keeping your finances in your head, often you have enough other things going on that push the finances out.  Then a financial decision comes along that is going to affect how much cash you have on hand.  Should you make that decision from your memory?  Learn more in this week’s blog.

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When it comes to time, we all have the same amount. No one has extra hours stashed away in a savings account for a rainy day. None of us can turn the clock back, stop it, or even slow it down. Our daily allotment of time is 24 hours—period—or is it? Learn more in this week’s blog.

Last week I talked about “Cash Flow: Why you pay yourself first.”  If you missed that post, you can review it HERE.  This week’s post is “Dealing Effectively with Change.” Change is inevitable.  Some changes we initiate and enter into willingly, while others are thrust upon us.  But regardless which kind or type it is, you need to deal with change.  Learn more in this week’s blog.

Last week I talked about “Cash Flow – Why timing is important!”  If you missed that post, you can review it HERE.  This week’s post is “Cash Flow: Why you pay yourself first.” It may seem obvious that you need to manage your cash, but you would be amazed at how many small business owners don’t have a cash management plan.  Paying yourself first is an important part of a good cash management plan.  Learn more in this week’s blog.

Last week I talked about “Keys to a good startup budget.”  If you missed that post, you can review it HERE.  This week’s post is “Cash Flow – Why timing is important!”  You are busy either growing your business or getting it ready to go. You know you will need a cash flow budget eventually.  But why do you need to do one now?   Learn more in this week’s blog.

Last week I talked about “How does a Cash Flow budget help my Small Business start up?”  If you missed that post, you can review it HERE.  This week’s post is “Keys to a good startup budget.”  Your startup business is getting ready to go and it is time to create your first budget. What do you need to include?   Learn more in this week’s blog.

Last week I talked about “Cash Flow - why do I need a budget?”  If you missed that post, you can review it HERE.  This week’s post is “How does a Cash Flow budget help my Small Business start up?”  You have a great idea for a new business.  But you can’t just dive into the business without a plan.  Part of that plan is doing a cash flow budget.   Learn more in this week’s blog.

Last week I talked about “What is Cash Flow?”  If you missed that post, you can review it HERE.  This week’s post is “Cash Flow - why do I need a budget?”  Good cash flow management involves more than just taking care of the cash you have. You need to look at what is going to be coming in, too.  In order to do that you need a good cash flow projection built from for your budget.   Learn more in this week’s blog.

Last week I talked about “Cash Flow Issues - Are you thinking big enough? Part 3.”  If you missed that post, you can review it HERE.  This week’s post is “What is Cash Flow?”  You often hear that small businesses fail because of lack of “Cash Flow”.  But what does “Cash Flow” really mean to a small business owner from a practical standpoint?  Learn more in this week’s blog.

Last week I talked about “Cash Flow Issues - Are you thinking big enough? Part 2.”  If you missed that post, you can review it HERE.  This week’s post is “Cash Flow Issues - Are you thinking big enough? Part 3.”  Do you find yourself reluctant to update your pricing because you are afraid you will lose customers?  While you need to be aware of the market value of your service, you pricing also needs to reflect the value of what you are delivering.  If you are delivering above average services, you shouldn’t be charging bargain basement prices.  Learn more in this week’s blog.

Last week I talked about “Cash Flow Issues - Are you thinking big enough? Part 1.”  If you missed that post, you can review it HERE.  This week’s post is “Cash Flow Issues - Are you thinking big enough? Part 2.”  Do you find yourself resistant to change because you tried something and it didn’t go well?  You need to examine your procedures periodically to make sure they are efficient and effective.  You don’t want to limit your cash flow by using outdated procedures that cost you extra time and money.  Learn more in this week’s blog.