Budgeting…. Do You Have To Do It?

There is a special feeling to fall.  The days are warm, the nights cool.  As the leaves start to turn their kaleidoscope of color and then fall to the ground, there is a smell to the air that can only be called “crisp”.  After the hot, humid days of summer it’s a welcome relief.

It’s also the time of year many organizations start the annual budget for the following year.  For some organizations it will be a choreographed production involving months of work, reams of paper, ponderous explanations, revisions and yet more revisions until that “magic number” is reached at the corporate offices.

For others, it’s a brief thought that is lost in the daily routine of day to day sales and/or production.

For most…for the shrewd and canny, it’s a time to determine where to take the organization and how to get it there.  Budgeting equals awareness.  Who doesn’t want that?  Who has time for it?

Budgeting is one of the single most important and challenging things that an organization can do for itself.  Sure, the bank wants to know where you will end the year and where you plan on being for next year.  Stockholders and partners are also telling you they need to know.

Most importantly YOU need to know.  Budgeting is your opportunity to look at the status quo and make changes for the coming year.  It is essential for determining whether or not you have the resources to operate, expand, and grow.  What is working, what isn’t?  Is your market growing or shrinking?  Have you gained or lost any major players that will affect your revenue?  What are your expenses doing next year?  Have your vendors let you know if their prices are going up?  Do you have any major repairs that you’ve been putting off?

If you don’t plan, how can you execute?

Albert Einstein said, “The definition of insanity…… doing the same thing over and over again and expecting different results.”

So, we’re all in agreement.  A budget is a wonderful thing.  It’s a pain in the back side, but it’s a valuable tool to determine the direction of the company – your company.  Doing a budget – even a simple budget – will let you make informed decisions for the coming year.

But… what if you don’t have a department devoted to budgeting?  What if you don’t have access to data –only your knowledge of the market and your customer?  What if it’s only you and you’re on the front lines each day putting out operational fires and don’t have the time?  How do you get it done?

Here are some ideas to streamline the process:

  • Assign some tasks to others. Ultimately, the budget is your baby.  However, others can and should help you with the data.  If you don’t have department heads or managers, get the line supervisors to help you with payroll, production costs, waste, etc.  Have them defend their numbers and explain any increases or decreases to you.
  • If it’s just you or yourself and one or two others, don’t go overboard. A budget doesn’t need to be 30 pages, with each department laid out in a dozen line items.  Take your major departments, revenue, building, production, sales, customer service, etc.  Then look at what you spent last year, how much you’ve spent this year as compared to last year and budget accordingly.  Don’t forget to take into account your hard earned knowledge of your market and adjust accordingly.
  • Have your accounting department or bookkeeper collect the numbers and prepare it in some sort of spreadsheet.
  • It’s not cast in stone. You don’t need to live or die by these numbers. Be flexible.  Whatever numbers you have today are based on your knowledge of the status quo.  Three months from now, something may have happened that requires you to revisit today’s assumptions.

If after all this, you still don’t have the time, inclination or knowledge to put a budget together, contact your tax accountants, financial advisor or a consultant to come in to get this project done for you.  A specialist will be able to benchmark your company against industry standards and help you see where you may be able to improve.

However you decide to accomplish the annual budget….. Yes, you have to do it.

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