How to overcome your top budgeting challenges
Budgets and budgeting solutions are at the heart of any business. Unfortunately, their importance doesn’t make the process any easier. When it comes to matters like profit and expenses, it’s a good idea to try to make as few mistakes as possible. Understanding some of the challenges that can come when you’re trying to put together your own budget can go a long way toward making sure your financial planning is helpful and concrete.
With a little planning and foresight, you can make your finances work for you, instead of the other way around. Here are a few tips.
Getting to freedom
Some feel budgets are constraining, because they determine where, when and how you spend your money. That’s the wrong way to look at it. The truth of a good budget is that it allows more freedom, since it ensures necessities are paid for, allowing you to spend the money allocated to the things you want, rather than need. If you still feel like your budget is chaining you down, look at your total spending amount for a month and remember that number. That’s the amount of money you can spend, and if you stay under it, you can be assured you’ll keep making money rather than losing it.
One of the major challenges to budgeting is trying to determine where to start. In the process of starting a business, it’s likely you’ve got some financial accounts, bills from multiple sources, payroll to establish … the list goes on. Unifying it all into one budget might have been a problem in the past, but today it’s relatively easy to overcome. Good budgeting tools, like True Sky, Mint, Quicken and others, can be a big help in arranging your data into a coherent whole. These tools, once you put in your information, can be used to track spending, the first step in creating a budget. You can use the tool to see where your money is going and then give it an appropriate percentage of your intake, dividing it into any categories deemed necessary.
Getting your employees aboard
Employees’ goodwill is important to how well your business functions. People who work for a company they don’t like have no respect for that company, which causes their performance to suffer. Transparency is the key here. Allow your employees to see every step of the budgeting process. If possible, allow them some say in how the company’s money is spent. At the very least, they’ll understand why you do things the way you do them, and really feel like a part of your business.
Getting to your goals
Budgets tend to have financial goals, giving the company something to work toward. The challenge in setting goals is determining just how strict you want to be about them. Where some believe a goal should be something you have to push hard to achieve, others believe a goal should be reasonable to conquer without having to work harder than usual. There’s a middle ground, however. Try setting multiple goals, or grades of success. If your target is set high, falling very short would be considered to have missed the mark. Coming very close or hitting the mark is a job well-done. Exceeding the goal is an act worthy of commendation or even some kind of reward.
But remember, using your budget to motivate employees can be a double-edged sword. Money is a touchy subject, which means your ethics regarding it must be above reproach. Your employees should be held to the same standard. No one, from the owner to the newest employee, should ever shift numbers around to make it look like they’ve reached or exceeded goals to gain a bonus. If performance in relation to the budget can result in higher compensation or bonuses, take care to watch your numbers closely. Again, a good budgeting application can be a great help in this regard.
Getting back on track
It’s impossible to plan for everything. Just when you feel like you’ve got it all set, a large and vitally necessary expense comes out of nowhere, completely derailing all your budget plans. If it’s happened to you before, you can make sure it doesn’t happen again, and if it hasn’t happened to you yet, now’s a good time for some preventative measures.
Every budget should have expenses set aside for emergency purposes. It doesn’t have to be big, but it’s not to be touched, except when absolutely necessary. That fund will build over time, so when the unexpected arrives, it could be enough money to cover whatever need arises. If you’ve got large expenses that only come up periodically, divide those into monthly amounts, then set that amount aside each month. That way, when the bill comes, you’ll be ready to pay it without having to take money out of other sections of the budget to cover it.– Contributed by Emily Hunter (@Emily2Zen) on behalf of budgeting and forecasting solutions experts True Sky.
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