It’s the most wonderful time of the year! It’s Budget Time! Oh, how I love budgets. They make me smile and laugh out loud with elf-like glee. No, really. And what’s even better is that my clients get downright gleeful, too. To see business owners get excited about budgeting makes me even happier. I start to dance around in my Cash Flow Wizard hat, the coins in my wizard pockets a-jingling, tossing handfuls of gold nuggets into the cheering throng.
Whoa! Easy does it there, Wizard! Gold nuggets weren’t in the budget!
The reason I love budgeting is that it is the most powerful of all the Financial Power Tools that I keep tucked up my Wizard sleeve. When a business (or a household) doesn’t have a budget, here is what happens: You spend money opportunistically. There’s cash in the bank account, and you just happen to need a hundred different shiny things and in walks a sales rep selling one of them. BAM! You get that shiny thing. Then, a month rolls by and your delivery van commits suicide rather than endure any more neglect. A week later you receive a letter from the I.R.S. chastising you for forgetting to pay your payroll taxes. (Sheesh, you miss one little week, and they get all up in your grill.) The end of the year rolls around, and you find out you paid out way more than you took in. That’s the “Fly by the Seat of Your Pants” approach to business finances. It’s chaotic and crazy, and it’s the way so many business owners operate because they simply don’t know any better.
There is a better way, and it’s all about planning. It’s about making decisions about where the money will go before it ever comes in the door. That’s what budgeting is all about. You make the decisions on a high level prior to getting the money. That way you ensure your business has what it needs. As money comes in, it is already spent on things like payroll taxes, van maintenance, and vendor payments.
Recently, someone took the Cash Flow Wizard to task about budgets. She said, in essence, “You can’t budget for emergencies.” Au contraire! You MUST budget for emergencies. Emergencies happen. “Stuff happens” is the #1 rule of small business. Now, my crystal ball doesn’t tell me ahead of time what the “stuff” will be, but I can guarantee there will be some. If your delivery van is 10 years old and hasn’t been maintained, the probability of it breaking down (or breaking up with you altogether) is very high. You’re already on borrowed time. But budgeting funds for such happenings means that when the “stuff” happens, it won’t bring your business to its knees.
Now, creating a budget takes a lot of the drama out of small business finances, and for those who like the thrills and chills of a chaotic financial existence, that is a total turnoff. For those of us who enjoy smoother sailing, business budgets can’t be beat. And to you smooth sailing fans I say, “Rejoice! Rejoice! It’s budget season. Time to plan for profits and success!”
Need help with budgeting? You can get a real world, crash course in great financial management right here.