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Budget? Yeah, we should probably have one of those

The why, the what, the how, and the most important considerations.  

  Budgets are the solution to strategic challenges.

Wanna know a secret?  Budgets are often wild shots in the dark.  What can you guess will happen in the next 12-36 months?  In this post, we’ll cover why you need to have one, how to use the data you already have, and the most important things to remember when you are creating your next budget.   

It is common for organizations of various sizes to practice bank balance budgeting.  You know, where you have more money in the bank than you must spend so everything is good!  The problem with this is that you don’t know the whole truth.  You can’t see where a tiny improvement could make the world of difference.  Sure, you can continue with these methods if you have a solid service or product but what if you could make a huge impact with some small changes? 

This is the time of the year when most people start to think about wrapping up and setting their plans for the next.  It is the perfect time to work on your annual or multi-year budget.  Once you’ve wrapped up your numbers for October, ideally you should have January plans in the works.

In a previous post, I wrote about The Top Five Financial Strategies to Control Your Business.  https://www.frenzytofreedom.com/top-five-financial-strategies-to-control-your-business/  A budget is a perfect example of how to implement these steps:

  • Plan
  • Organize
  • Document
  • Compare
  • Test & Measure

“The best way to predict the future is to create it.”  Peter Drucker

If this is your first budget…

You already have a lot of data!  Where does your data live?  Can you pull reports from accounting software like QuickBooks?  Does your bookkeeper or CPA know?  Even if you don’t have accounting software, you can pull bank activity or statements into Excel and reorganize the data into a meaningful starting point.

Look for trends in the seasonality of your revenue and expenses.  Identify what your margins are overall or on your individual revenue streams.  Group expenses by month or vendor and gather totals.   


Not your first rodeo?  How did you do?

If you have a budget from the current year take a few minutes to reflect on it.  Does your process work for you?  Are the questions that you ask each month leading you to some actionable tasks to make improvements?  If not, how can you ask the question differently or an all-together different question?  Examples could be, what is my monthly margin?  How can I improve my margin or make more on X line of products or services?  Maybe I should stop selling Product 5 and put more efforts into Product 1? 

If your question is solid, you may just need to build out your budget.  Are you tracking it in your accounting software or CRM? Or do you have an excel sheet or Google Sheet that needs to be updated? 

Ensure accuracy

Whether you are creating your first ever budget or building upon those from previous years, you will want to spend some time ensuring accuracy.  Otherwise, those oranges you are comparing to are really apples.  No sense in wasting time doing something that isn’t accurate or useful! Check to ensure all of the things that your reports say happened actually happened.  There shouldn’t be any unreconciled items, duplicate checks or invoices.  

Set expectations

What is your goal?  What future would you like to see?

Whether you have a goal to increase your revenue by 2x over last year or to reduce your cost of goods to increase your margin, break down your big goal into bite-size pieces.  What needs to happen in the first quarter of your year to make sure you meet that goal?  What needs to happen in the first month of that quarter to set you on the right course? 

Goal setting is important and in the scope of budgeting, allows you to maneuver in the right direction.  Your expectations for the month are based on history or your intent of efforts.  History, are the reports you pull of your accurate data which tell a story.  Intent of efforts are what you will DO to impact that history.  If you know what happened last January and you would like to increase your sales, what are you going to DO to make that happen? 

Measure against reality

Wanna know another secret?  Most people/organizations fall off the wagon and NEVER revisit the budget they created until the end of the year.  It might be because the process isn’t an established part of their schedule.  Or they really don’t like the numbers.  Or because they are busy with other things.  Or doing well enough that there is still money in the bank.  Or all of these!

If you are board approved then a budget is a regular part of your year end.  But is it part of your month? 

The most value in creating a budget and setting a course for the right direction is tracking that course.  Are you off a little in one direction?  How do you get back on course or recalculate (reforecast) to make it to your destination? 

Make it a process.  Write it down and repeat that process.

Keep sight of the big picture

The details are recorded and reconciled regularly and sometimes it’s hard enough to keep up with that.  Make sure when you know they are accurate and gathered into a format you can compare with other periods or your expectations, that you can also see how they align with your vision.  If you were down this month, how will you adjust and make up for it in the next? 

Create a plan for increasing efforts, increasing margins, or reducing expenses.  Or shift into a new direction. 

The Skinny

Ensure accuracy – don’t waste time!

Find a plan that works for you.

Use history to find patterns and solutions to create a better future.

Measure against projections.


Keep the big picture in mind.

You aren’t alone.  

Most people that come to me for help are high achievers responsible and capable of huge tasks.  More than 75% of the time, a clearer picture of financials is the most important task we can start with.  Understanding your budget and potential helps make strategic decisions for hiring new staff, opening new stores or creating a solid team culture.  Focus your time and attention on what is going to bring you the most value for your time investment.

Optimize Your Business Today!

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Want help?

When determining what will bring the most value to your time investment, I have found companies and non-profits of all sizes have a need for clarity of financials.  

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