By Jeff Bronswick, Managing Partner of Bronswick Reicin Pollack, Ltd., CPAs
If your business is anything like most businesses, budgeting is one of those things that you are committed to doing, but time has a different plan.
As a business executive, you know the importance of creating a budget that matches your business’ strategic plans and ongoing operations. However, the day-to-day activities of running a business sometimes takes over and time just doesn’t allow the proactive budgeting process to take place.
Don’t get distracted. Stay committed and create a budget that will keep your business on track.
What you should take away from this blog:
1. Set goals
2. Hold your employees accountable
3. Be profit-driven!
What you need to do to get there:
Accounting Information and Controls
Without accurate information, you cannot make good decisions. Make sure your accounting is accurate, timely and enables you to drill down for details when necessary. You will have a better understanding of the financials side of your business. You will also have fewer surprises and more control. Also, you need good financial controls and processes in order to minimize mistakes, avoid being taken advantage of, and to maximize profits.
Specific Sales Goals
Sales goals should be consistent with the type of sales in your overall marketing/business strategy. Goals should identify who, what, when, where and how. Hold your sales staff accountable. Don’t let them decide how much they can sell. Management determines pricing and terms. Any price concessions must require your/management approval. Monitor sales people frequently. And, of course, reward those that meet or exceed the goals you set.
What does the company really need to drive a successful business? Hold your employees accountable for the performance of the business, control of costs and productivity. Set goals for them and train/mentor them.
A business is formed to earn profit and increase the wealth of its owners. If a company isn’t profitable, it will ultimately fail. Management should be rewarded based on bottom line results and not on sales or gross margins. If the company doesn’t make a reasonable profit than management hasn’t earned an extra reward.
Break It Down and Pace Yourself
Take pride in your business and believe in the dream. But, remember to set “realistic goals”. Overstated growth expectations can make the budgeting process a waste of time.
Don’t get overwhelmed. Take into consideration current trends, new projects, strategic initiatives and the changing environment. Evaluate your needs and take it one line item at a time.
Let your budget serve as the roadmap (guide) for a business that is attempting to meet its profit goals, its cash flow goals and its continued overall growth goals.
Take a Fresh Look
Do you want to know why so many budgets miss the mark? Beyond the proud owners who aspire to see greatness in short order, the real reason so many budgets miss the mark is because they aren’t given proper attention, AND the creators are often too close to the situation.
While it may seem being close to the situation would serve as a great benefit for the budgeting process, many times a good budget needs some outsider perspective.
That is why your CPA can be a great resource during the budget planning process.
Your CPA will tend to know quite a bit about your business, (Depending on the relationship) but they will also be far enough removed that they can ask the questions that you may be forgetting to ask.
Sometimes an eye that hasn’t been looking at the plans and the numbers every day can provide valuable input into the budget process pointing out details that could be costly if missed.
A CPA can provide a wide area of expertise and business advice. The exposure to so many types of businesses and a variety of business needs can help your business plan be better. A better plan often leads to greater success.
Better Budget, Better Results
It is easy to put off budgeting. It takes time, it takes resources and it doesn’t immediately feel like it shows a return.
I’d like to share something I have learned from working with many great businesses…
The best businesses take the budgeting process seriously.
The best businesses get better at budgeting every year.
The best businesses I work with are more able to deal with the unanticipated when they have a budget in place. A successful business incorporates a forward thinking mindset when it comes to the cash flows and profits of their company.
If you need a little help getting started, don’t be afraid to ask.
Disclaimer: The information contained in this Blog (the “Blog”) is intended solely to provide general guidance on matters of interest for the personal use of the reader, who accepts full responsibility for its use. In no event will BRP, or its partners, employees or agents, be liable to you or anyone else for any decision made or action taken in reliance on the information in this Blog or for any consequential, special or similar damages, even if advised of the possibility of such damages.