Top Five Reasons your Business Needs a Budget

Ok, I’ll confess. When it comes to detailed business budgeting I am like a reformed smoker. I used to say ‘yeah yeah I know I should’ but it wasn’t until I actually did something I felt really good and started trying to persuade everyone else to follow suit.

So why have a business budget?

1) To have a blueprint, since we have become highly disciplined in our budgeting practices so many decisions have become easier.

‘should we buy this?’ becomes ‘is it in the budget?’

‘should we run more marketing?’ becomes ‘how are our sales performing compared to budget?’.

2) To see your forward progress. You can compare budgets to previous periods and see how much you are improving.

3) To keep stakeholders happy. Banks, investors, and current and potential team members feel much more confident when they can see you have a plan.

4) To have something to celebrate. Getting the financial report comparing actuals to budgets each month is a little bit like getting on the scales when you been diligently exercising and eating salad. (and depending on the results it is probably also like getting on the scales after a month of chocolate cake and television as well).

5) To force you to be systematic about your business planning. The budget really is the illustration of the ideas you have decided to implement. One of the challenges of being an entrepreneur is finding the ability to not chase every brain snap you have but to pick a few ideas and follow them all the way through. Once you commit in writing to those ideas and turn them into a budget it helps with maintaining focus.

My father would have plenty to say if he saw his daughter who bought a stereo for $550 when she was 17 (that was a lot then!) writing on budgeting. Lucky he doesn’t read my blog!