Money

How to budget for your company so you can grow forever

Knowing how to budget will provide you the freedom to be creative
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Step 2

Having everyone on the team collect all expenses that relate directly to them. If the whole organization does this, you’ll get a clear snapshot of the company’s expenses.

Step 3

Remove duplicates from the list (chances are there will be duplicate entries, especially for subscriptions multiple people in the company use).

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Incremental budgeting gives you some freedom, but has drawbacks
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Step 4

Each item is debated for its value to the company, and only added to the budget if there’s value.

The problem with zero based budgeting

Be aware that zero based budgets have the power to both increase and decrease creativity in your business.

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Draw down budgeting has both pros and cons
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On one hand, people’s creativity is sparked because they have to justify their expenses and will likely be asked to do more with less. On the other hand, zero-based budgets can turn into a game of getting as close to zero as possible. If that happens, everyone will look for any reason to cut an expense instead of looking at the value it gives to the company.

To avoid a creativity decline, give your team some time beforehand to look at how each expense creates value for them. That way you avoid the issue of someone feeling pressured if they can’t come up with an answer on the spot – accidentally cutting an expense that provides value in a unique way.

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