Are you a living, growing business?
Are you starting with a tied-out balance sheet and clean financials?
If you answered both questions yes, then my response would be that you do need a budget.
All too often, businesses don’t develop budgeting practices. This can be ok if the business is established, stable, and doesn’t anticipate a lot of volatile changes in income or expenses.
However, it can be important for businesses that don’t meet these criteria to have a budget set up, and then monitor against it, to determine if the goals are being met.
Budgets aren’t just for adding pennies to the piggybank! They are a sophisticated tool to help plan for your business!
Common Budget Situations
- New start up business – must budget in order to even cash flow and know if the business is feasible
- Growing business – must budget in order to ensure pricing of product and associated growth can cover rising costs and expenses
- Expanding fixed assets, such as equipment or building additions – must budget in order to ensure the expenditures on fixed asset additions can be covered
- Struggling business – must budget to ensure cash flow and try to avoid landmines that could ultimately sink the business
- Businesses adding managers or decision makers in the process – should budget so these individuals know goals to hit and the available resources and constraints
I have served on the Boys & Girls Clubs of Columbia board for many years. It is a fast-growing non-profit, that has continued to expand sites and the number of kids served every year. Rarely have we had a year where we can just assume “same as last year”. Even though it can be a rough process, every year we develop a budget. Every month, we evaluate our budget with the actual numbers, questioning major differences (positive or negative).
Many nonprofits must have budgets and evaluate against them, mainly because there is a governing board ensuring the organization is functioning properly. I think it is time that more for-profit entities follow their lead and start a formal budgeting process.
Many software programs, including QuickBooks, can generate budgets and run budget vs. actual reports. Let me know if I can help you get a formal budget process established.