You have all heard how important budgets are. But if you have never used a budget, why start now? Here are four reasons why companies do not have budgets or, if they have them, do not use them effectively.
1. They are incorrect or out of date
Budgets are much like goals or dreams. They change. Example: if you have set your sales budget according to the previous year plus anticipated growth (good idea), but have reached that figure in the first 9 months, you have to change it.
All the numbers in a budget are codependent. The sales increase will have an impact on the production figures so the cost of sales will increase etc. This might not be a dramatic change but a change it will be.
2. They are too much work
There is no excuse that it’s too much work. If budgets are too much work then the implication is that the future of your business is too much work. They are too much work because they are not working FOR you. If you are constantly working on the document, it will start doing some work for you and provide you with insight into whatever you ave prepared it for.
3. I don’t have time for using a budget
Without sounding like a CD on repeat, that is not an excuse! Saying you don’t have time to do budgets, means you are saying that you don’t have time to work on your business. Time is something that you will never get back, agreed. This goes back to number 2 above because if you invest a little time on a constant basis, the value will arrive and soon enough. You will see that.
4. We use last year’s budgets
It’s fine to use last year’s budgets. But it can’t be a simple cut and paste exercise. They will have some good points that you can glean from them but they have to change. You are using last year’s figures and think it is fine, primarily because that is what was done last year.
Do these sound familiar? Have you said them or are you saying them?
- This article was originally posted on 12 April 2016 and was updated on 25th March 2020.
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