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5 Reasons You Should Develop A Business Budget

Should you budget for your business? The answer is YES! Here are some reasons why.

1. The budgeting process helps you focus on that which is truly important to you.

Clarifying your goals and describing the process for achieving them is a function of your business plan.

If you had a goal of increasing your customer base by 10% and you also know from experience that the most predictable means of obtaining new customers is through a certain form of advertising. You know that for every X dollars you advertise in that certain medium, you gain one new customer. In your budget, you would simply include sufficient money for that form of advertising to meet your goal.

Or let's assume that currently services provides the majority of your income and you desire for other revenue-generating activities to play a greater role. By budgeting for these other revenue sources you can determine whether your plans are valid.

2. Budgeting forces you to set and systematically maintain priorities.

There are many ways we could look at the issue of priorities. Let's examine two.

If you are a small business owner, you probably perform many or most of the duties required to run your business yourself. Even if you outsource many of the tasks, managing them takes time as well. Are you taking on too much, more than you can reasonably handle? Are there some revenue sources which provide relatively little to your bottom line and should therefore be eliminated completely?

My other example relates to work/family balance. If you have promised your family you would begin taking weekends off, do the revenue sources included in your budget require working during that time?

3. Budgets help you plan for "non-negotiables".

Here's what I mean by that statement. In our business, there are things that we can't change, such as taxes. For reasons which make no sense to me, some business owners ignore the requirement of paying taxes and often lack the funds to pay the taxes at the proper time.

Of course, you can always do tax planning and reduce your tax bill; however, some level of taxation is unavoidable and your budget should reflect a reasonable amount for taxes. This will help ensure you are charging enough for your products or services and engaging in activities that are sufficiently profitable.

Much more important is the "non-negotiables" you have set for yourself. If you have a personal goal to save a certain amount of money every month, your business must generate sufficient net income for this to be possible.

4. Budgeting provides for accountability.

If your company has different segments run by employees, family members, or outside contractors, your budgetary and cost accounting system will allow for whatever level of accountability you wish to exercise or allocate.

5. Budgeting helps you plan for the future

Budgeting puts you in control of your money rather than it controlling you.

I hope this article has provided you with sufficient motivation to begin budgeting for your business.

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