Treat budget planning as a tool to help your business grow
The New Year brings new opportunities for a clean start. If your fiscal year just started, then you also get to start with a new budget. This can be a real breath of fresh air. If you haven’t looked at your budget in a while, here are some tips for leveraging your budget to its fullest potential.
Is Your Budget In Place?
Whether your fiscal year just rebooted with the beginning of the calendar year or started on another date, it makes sense map your business to your budget. If your fiscal year began January 1, then you probably created your 2015 budget last fall. This was a time when your company was taking a look back and trying to forecast sales moving forward and what those numbers meant for your business. The most important question to ask yourself when reviewing your budget now is, “Is it realistic?” A strict budget may be kind to the bottom line, but makes everyday transactions and measuring success almost impossible.
Defining Your Budget’s Value
Sticking to budget may be an eye-roll inducing phrase, but there are real benefits to using a budget as a flexible guideline when conducting business. Here are just a few of the valuable reasons to stay as true to budget as possible:
· It can help with leverage when negotiating business. If you only have a certain amount of money left in your budget and a business offer comes up for negotiation, this is a rock-solid way to play hardball for the offer you really want. Just be sure it’s not such a hard sell that they walk away from negotiations.
· It keeps you focused on the big picture. The bottom line is there for a reason—to keep you focused. Remember that each small action or change you make affects the bigger picture in some way.
· It creates accountability for each department. A company budget empowers your department managers to create accountability for their teams. Each department knows exactly how much they have to spend and can maximize their budgets accordingly.
How to Be Flexible with Budgeting
Just because you have a budget guiding your financial decisions doesn’t mean that there isn’t any wiggle room. The only person who can 100% stick to their budget is someone who must possess some sort of clairvoyant skills because no one knows exactly what the next year will bring. If we all stuck to our budgets to a tee, we could easily miss out on some of the most lucrative opportunities because they didn’t “fit within the lines.” For example, if a great marketing opportunity comes your way, but it exceeds your marketing budget by less than 5%, I would say it’s more than okay to shuffle the budget around to make it work. If it exceeds the budget by more than 10%, then you have to make the harder decision of, “Is it worth it?” Just remember your budget is there as a guiding light, but don’t miss out on opportunities to shine because you’re caught in its glare.
Using Your Budget as a Tool
Sometimes you just need to see the numbers. Not in an Excel spreadsheet, but in an easy-to-read, at-a-glance, visually appealing format. If you have an analytics whiz or budget software that can whip up these reports for you monthly, I highly recommend it. This visual representation on what you’ve budgeted, what you’ve spent, what you have left and what the future is looking like is a great way to leverage the value of your budget. This way, your budget isn’t just a document with numbers and a bottom line; it becomes a true business tool. The saying is that “the numbers don’t lie,” but they can certainly be confusing, so requesting a short summary of expenses, income and quarterly forecast is key in helping you make informed decisions and any necessary adjustments to ensure the company flourishes.
A Budget and a Plan
If you need help navigating your budget strategy (or lack thereof!), The Alternative Board – Denver West can help. From Business Resources to putting together a plan for overall business growth, including budgeting, we are here for you.
By Blair Koch
