I frequently hear business owners say, “I don’t like budgeting”. I can tell you these owners are struggling with growing their businesses if they don’t have a budget.
While you might think budgeting is a waste of time, it’s really a much-needed tool for growing your business. Here are 4 ways budgeting can help your business growth:
- Evaluate and plan your spending
- Act as a target for spending
- Speeds up financial performance reviews
- Allows you to effectively delegate
Evaluate and plan your spending
If you don’t have a budget, you probably don’t have a business plan—another tool that helps you grow your business. Budgeting is part of business planning. I hear many owners say it’s difficult to predict how much they’re going to spend. If you plan the things you will try to accomplish during the year (business planning), then it’s much easier to predict how much it will cost. We call this high impact business planning.
Budgeting acts as a target for spending
Your budget is to your spending what your sale goal is to your selling – a performance target. If you manage your sales, you review them each week or at least each month to make sure you’re hitting your sales quota. Use your budget the same way. Create a target and verify that you are keeping your spending within your budget.
Budgeting speeds up financial performance reviews
Don’t get stuck in the details. At least make sure you’re hitting your COGS, gross profit, expense, and net profit goals. Look at these numbers as a percent of revenue. If you’re within these percentages set by your budget, then you’re on track and can move on. If not, then you need to dig a little deeper. This is why good financial accounting is so critical to growing your business.
Budgeting allows you to effectively delegate
Finally, a big challenge many owners face as their business grows – delegating responsibilities. You know how much work it is running a small business. Many owners subconsciously self-sabotage their businesses because they feel like they are losing control. Budgeting helps you take control! Your budget sets the spending targets. When delegating work, there are expenses in the budget associated with that work. So, your budget communicates the expectations. This helps with accountability which gives you the control you need to manage from a distance.
There you have it—4 ways budgeting helps you when growing your business. What are others that you’ve experienced as you have grown your business?