Optimized CFO

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Do You Need a Budget?

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

  1. New start up business – must budget in order to even cash flow and know if the business is feasible
  2. Growing business – must budget in order to ensure pricing of product and associated growth can cover rising costs and expenses
  3. Expanding fixed assets, such as equipment or building additions – must budget in order to ensure the expenditures on fixed asset additions can be covered
  4. Struggling business – must budget to ensure cash flow and try to avoid landmines that could ultimately sink the business
  5. 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.