Why You Need a Budget
Like any other company, you need to review the performance of your small business towards the end of each fiscal year to assess how well it has performed over the past year.
If the results appear dismal, there is a distinct possibility that it is the result of bad planning and lack of a budget.
The Reason for Preparing a Budget
As a small business owner, having a budget will equip you with the ability to monitor the financial trends of your company over a fixed period of time. You will be able to measure your cash flow, growth, assets and liabilities using the budget as a resource for forecasting.
A Budget Is No Guarantee of Success
You shouldn't treat your budget as something rigid; rather, it is meant to ensure accountability and financial integrity. It should also not be used as an absolute guideline for spending.
You should understand that simply having or following your budget will not guarantee business or financial success.
When You Should Start Working On A Budget
You need to start working on a budget at least one to two months before the arrival of the next fiscal year. Your budget should serve as a guideline for key company employees to see what your company is aiming for.
Your budget should be in line with your strategic plan and should reflect the direction that your small business is heading.
A Budget Needs To Be Realistic
The budget that you develop should present a realistic picture of your spending needs; it should not project unrealistically high revenues, or it may be a cause for fiscal failure.
A budget is meant to map your business' financial trends, in order to forecast your financial needs.
If you don't have a budget, you should develop one now. The financial health of your small business depends on it.
