Small Business Budgeting Tips: Perfecting the Plan that Keeps You On-Track

Posted by in Management & Business


At the end of every fiscal year companies tallying up their scores to see how they’ve finished. Unlike the game of golf having the highest score is cause for celebration, being in the black you’ve done well and deserve some congratulations. If there isn’t a soirée going on in your business maybe it’s because you didn’t plan for a year-end party, and that could be the direct result of your failure to budget.
 

To be successful in business, budget cannot be a taboo word in your company. One of the skill sets you as an owner or manager need to possess is the ability to plan ahead, this includes that ability to budget. If you’re a visionary and lack budgeting skills, then stop reading and go find someone who is. So before we discuss budgeting tips, let’s first discuss what a budget is and isn’t.
 

What a Budget Is:
A budget is a proposed plan to monitor financial activity over a period of time. A budget is a planning tool an owner and/or manager should be using to measure trends over a fixed interval; this includes inflow, outflow, and asset/ liability growth. Finally a budget is a resource to forecast an assumed outcome.
 

What a Budget is NOT:
A budget is not the law; it is not to be used as a means of accountability and to ensure financial integrity. A budget is not to be used a ceiling to spending, and a method of absolute control. And finally a budget is not a guarantee so financial and business success.
 

So now that we have defined what a budget is, let us get to how to properly use and understand how a budget actually benefits a company.
 

The budget should be put together and approved at least 1-2 months prior to the start of the new fiscal year. This will allow for key employees to look at what the company is trying to accomplish and what is being aimed for. So for this to happen planning will need to take place approximately 3-6 months before the start of the new fiscal year, this of course depends on the complexity and size of the company.


The budget should reflect the direction that the company is headed in; this of course is handed down by the CEO and/or Board of Directors. Everything about the budget should point towards the strategic plan the company has adopted. The budget should also be multifaceted, not only should you include a Profit & Loss operating budget, but also a Balance Sheet budget to help track cash inflows and outflows.
 

Finally the budget should be realistic. An exponential increase in revenues without any foundational proof or purpose can lead to fiscal year failure. Again remember the budget is for mapping out trends in an attempt to forecast growth or decline. All the pieces must fit, in business there is usually a cause for increased revenues (hint: check for the reason in your expenses section!).
 

To summarize let’s recap the key points:
1. Budget is not taboo
2. Budget is a proposed plan
3. Budget is not the law
4. Approval should allow for time to disseminate throughout the company
5. Reflects the strategic plan and heading of the company
6. The budget should be realistic, for all growth there should be a reason

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  • Melissa Kennedy
    Melissa Kennedy
    Thanks for taking a moment to leave a comment. Whether you're a man or a woman, budgeting is an important skill. Both a household budget and a business budget rely on having accurate numbers, realistic expectations about expenses and a little room for adjustments.
  • Sarah
    Sarah
    Women in the business world get eaten up so easily by males. I work in the marketing world and every day I have to prove my worth, and to be heard. It's all about being one step ahead and knowing an answer to any question.
  • Lefty
    Lefty
    Keep these articles coming, as they've opened many new doors for me.
  • Andie
    Andie
    Thanks for the insight.
  • Doc
    Doc
    Wow! Why can't I think of things like that?
  • Tips on Budgeting
    Tips on Budgeting
    A budget is not something that came out of nowhere. It should be based on figures that can be supported by reasonable expectations. These expectations are based on a combination of past financial results and anticipated growth of the company (or decrease). To gather the information you need, you need to consult others in your organization. Your accountant should be able to provide basic data for prior periods, while sales managers and other key staff can provide a reality check on sales and the expected costs. If you have no other leaders of your company, you might consider creating your budget figures from another small business owner you trust.

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