Have you ever wondered how your business is really doing? You know you’re making sales, but the money seems to go out the door paying bills just as quickly as it comes in. And then taxes…. ugh. It can be overwhelming.
But if there were one activity that would allow you to be on top of your business and know the exact level of financial health in your business, it would be this.
Yes, not very sexy or flashy, but that budget should be as close to you as your best friend, if not closer. Every successful business needs a budget, regardless of the size of your business. An operating budget lays out the financial plan for your business and shows you what you need to do to reach your financial goals.
The benefits of budgeting:
1. You have made a plan for your business
When you don’t have a plan, there is a lack of direction and goals. You won’t know what you are working towards, or if you have a goal in your head, planning it out with a budget will be the roadmap you need to achieve that goal. When you create a budget, you have solidified your goals and can measure your progress against those goals each month and quarter of the year.
2. You will understand where your money is being spent
You will gain a clearer understanding of what makes your business tick and how your business decisions are affecting your bottom line. You’ll get a clear understanding of the costs of your offers and how much profit you make on each sale. You’ll understand the volume of sales you’ll need to achieve to achieve the profit you desire. You will be clear on every financial aspect of your business.
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3. You can identify issues before they become problems
Quite often, you are alerted to issues when they become problems, and by that time, a lot of money has leaked out of the business. When you monitor your expenses against your budget every month, you will see issues before they become problems, and you can prevent further damage through early intervention.
4. Budgets offer the best opportunity to understand your business
When you plan out your business goals, you will have a better understanding of how many sales you need to break even, the expenses you can afford to achieve your goals, how much it costs you to sell a product or service, and you will know if it is worth your time. No better tool can tell you how you are performing to your goals. You don’t need to be a CFO to understand what is going on in your business. As the CEO of your company, you need to know your numbers.
The bottom line is creating an annual operating budget allows you to plan your year out in advance, understand what you need to achieve your goals, and once you’ve been through the process, it gives you a deeper understanding of your business.
Now is a great time to create your budget and start monitoring your progress against your goals. It’s ideal to have a budget prepared for the start of your fiscal year, but it is never too late to start. Start now and maintain that habit throughout the life of your business. You won’t regret it.