What Are Your Excuses For Not Having A Business Budget?

Year-end always brings a significant list of financial tasks to complete. We start thinking about closing the books, organizing taxes, selling investments, enrolling employees in benefits and establishing budgets.

When your list is particularly long, one specific task might seem to loom quite large. If this happens, it's likely that you procrastinate. And one particular area of procrastination is the budget. In fact, many business owners are so determined to avoid putting together their budgets that they'll do just about anything to push it under the rug.

Here are some of the excuses I've heard, and why they just don't hold water.

Excuse 1: Budgets are too specific; I can't be expected to stick with my initial estimates for a whole year. In fact, though, even though you've created a budget, it doesn't mean you've done so in stone. The budget is yours and no one else's. It's not a legal document that binds you to any promises, nor have you made a blood oath (I hope) that you would honor it to the letter. In fact, some estimates say that almost 80% of companies who create budgets don't change them even a bit during their fiscal year. However, that attitude is not realistic. Not only can you change your budget, you should change it as circumstances make it necessary. You can also budget for a shorter time frame if that works better for you, such as per quarter instead of for the entire year.

Excuse 2: I won't be able to react as flexibly to an unforeseen crisis if I have a budget in place. The reality is that companies that create budgets tend to be more flexible and more proactive than companies without budgets. When you're actively tracking your progress toward a specific goal you can tell much earlier on if you've hit a snag. You can react while the situation is smaller and more manageable, and sometimes you can even see a problem before it occurs.

Excuse 3: The budgeting process is too complicated and time consuming. Well, this is actually true for too many companies, but it doesn't have to be. Many companies spend months agonizing over their budgets and devote upwards of 20% of management's time to their creation. Although a certain level of detail is needed if the process is going to be effective, budgets can be fairly simple. And the time you invest in planning upfront is never wasted; it's time you save down the road reacting on the fly to decisions that need to be made anyway.

Excuse 4: My industry changes too quickly for me to adhere to a budget. In fact, every company experiences this, because conditions change moment to moment in every industry, not just yours. Therefore, that's not a legitimate reason to avoid this necessary plan for the future. Your budget does not ask you to predict things you can't know, such as whether fuel prices will go up, whether staff turnover will be high, whether laws will be passed that will impact your business, and so on. Rather, a budget forces you to look at the overall picture and make a commitment to goals you want to accomplish, along with the actions you plan to take to do just that. These things are under your control, regardless of changes in your industry. You need to be able to look at your business and know what you want to accomplish in the next 12 months. If you can't do that, you need to figure out why.

Excuse 5: Budgets don't mean anything, because everybody just plugs numbers in that will paint the best picture possible. It's true that if you create a budget that isn't based in reality and is based upon pipe dreams, you're going to set yourself up for failure instead of success. In fact, one Internet poster likened the budgets to pornography, calling them, "a fantasy about how the author would like the world to look, having a relationship to reality as the world, designed to too late, stimulate and motivate the reader, but ultimately resulting in a sense of alienation and despair." If this describes your budget, it's of no use to you. Your budget should be based in reality.

Excuse 6: I have a budget in my head, but not written down. While it's useful to be able to keep certain figures in your head for easy access, if you try to keep track of everything mentally, that's overly ambitious. If your company is small enough, you'll be able to do this for awhile, but eventually it's just not going to be possible. In addition, it keeps managers and employees from being able to take ownership of some of the results themselves, and also lessens their own sense of accountability. Even if you don't think your company is big enough to have a formal budget just yet, it will be one day. If you sit down and establish creating a budget as a good habit now, it will be much easier to continue it when it's a necessity.

Remember that in reality, a budget is just a plan. It makes you step out of your everyday business view and forces you to look at the big picture strategically, so that you have to take note of where you are now and plan for where you want to go. Without a formal plan to help inspire you to action, planning a budget will likely be pushed to the back burner as you spend all of your time managing daily fires to be put out.

So what is it? Your dog ate it? You need to shampoo your hair and won't have time? You've got relatives in from Iowa? Or are you ready to drop the excuses and start crunching numbers?

Article Source: Main Articles

About the Author: Margot Brandlin is a Minneapolis Bookkeeper who writes for OWL Bookkeeping and CFO Services. Owl has a Bookkeeper in Minneapolis eager to take on your business finances.

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