The importance of revenue cannot be overstated for business survival and growth. But if you don’t manage the revenue once it comes in with a good budget, you risk losing money as quickly as – or even quicker than – you made it. Think of a budget like your guidepost through the business world. It looks at money coming in and money going out, directing cash flows as it goes. With that in mind, knowing how to budget is crucial whether you’re planning for the whole business, your department, or a project.
While you may not be able to stick to a budget 100% of the time, having it means you have a plan for your money. Just as you’d never begin a large project without some sort of execution plan, you need the same form of execution plan for your money – that’s a budget.
Why you need a budget in business
Creating budgets requires honesty with yourself and a bit of a time investment – luckily, it has a lot of upside potential benefit for the business.
Budgets help you stay on track
A study by Clutch found that over 60% of small businesses had no budgets. The study further found that the top financial worry for small businesses was unforeseen expenses – issues that could have potentially been avoided with a budget.
When you know how to budget, you know where your money is going. It’s something you do automatically anyway as a business owner, though at the start the numbers are probably in your head. By writing them down, you solidify your commitment to your priorities and can stay on track.
Budgets help you set goals
If you start with an ambitious desire in business, you’re going to need money to make that happen. If you forecast you’ll need $10,000 for marketing to make your products more successful, then a budget will show you where that money will come from and what you need to forgo.
On the flip side, if your budget falls short of that $10,000, you can make decisions about what to cut or lower in order to make up the necessary cash. If you can’t, then the budget offers a reality check that your goals may have been too much for the business at that time.
Budgeting makes your business real
It’s easy to make bold claims about how much you’ll bring in, but the process of budgeting puts all the numbers down in black and white (or black and red, really).