The Dog Ate It (and Six Other Excuses For Not Having A Budget)
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by: MargotBrandlin
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Year-end always brings a significant list of financial tasks to complete. We start thinking about closing the books, organizing taxes, selling investments, enrolling employees in benefits and establishing budgets.
And when that list gets long or one item seems overwhelming, human nature kicks in and it's not often pretty. Nowhere have I see business owners procrastinate more or make more excuses than when I bring up the topic of budgets. So determined are they to "get out of" putting together a budget that they've offered up everything short of a permission slip from their mom to be relieved of the obligation.
Here are some of the more common excuses, as well as the reasons they just don't fly:
Excuse 1: Budgets are too specific; I can't be expected to stick with my initial estimates for a whole year. In fact, though, even though you've created a budget, it doesn't mean you've done so in stone. The budget is yours and no one else's. It's not a legal document that binds you to any promises, nor have you made a blood oath (I hope) that you would honor it to the letter. In fact, some estimates say that almost 80% of companies who create budgets don't change them even a bit during their fiscal year. However, that attitude is not realistic. Not only can you change your budget, you should change it as circumstances make it necessary. You can also budget for a shorter time frame if that works better for you, such as per quarter instead of for the entire year.
Excuse 2: I won't be able to be as flexible with unforeseen circumstances or a crisis if I have a budget. In fact, the reality is that if a company has created a budget, it tends to be more proactive and flexible than one without a budget. If you actively track your progress as you move toward a specific goal, you'll be able to foresee any problems much easier with a budget that without one. You'll be able to react to the situation while it's less of a problem and easier to manage. Sometimes, you can even predict and forestall problems before they occur.
Excuse 3: It's too complicated to go through setting up a budget. In fact, this is a reality for many companies, but it doesn't have to be true. Even though many companies spend a lot of time sweating over their budgets and may even devote as much as 20% of their management's time to budget creation, this just doesn't have to be true. It's true that a certain level of detail is necessary in order for budgets to be effective. However, budgets can be pretty simple and still function just fine. Whatever time you invest in planning your budget, it's not wasted. You'll save time by being prepared for what may come up down the road because you've got a budget; when the time comes for you to make a decision on the spur of the moment, you'll know what to do, because you took the time to prepare.
Excuse 4: My industry is in flux and ever changing, so I can't commit to a budget. In fact, every industry is in flux at every moment. Your industry is the same as every other, and you need a budget regardless. Of course, you can't predict unknown events, such as if gas prices will rise, whether laws will be passed that will impact your profit margin, or whether you'll need to hire new staff, but you can still use a budget to plan and set goals over the long haul. For this, you need to plan to take action at given times, which is under your control. You need to be able to look at your business with a critical eye and decide what you want to achieve in the next 12 months. If you can't do that, then it's time to sit down and figure out why that's true.
Excuse 5: Budgets don't mean anything, because everybody just plugs numbers in that will paint the best picture possible. It's true that if you create a budget that isn't based in reality and is based upon pipe dreams, you're going to set yourself up for failure instead of success. In fact, one Internet poster likened the budgets to pornography, calling them, "a fantasy about how the author would like the world to look, having a relationship to reality as the world, designed to too late, stimulate and motivate the reader, but ultimately resulting in a sense of alienation and despair." If this describes your budget, it's of no use to you. Your budget should be based in reality.
Excuse 6: I have a budget, it's just in my head not on paper. Keeping mental note of your company's projects, numbers and expenses is overambitious. You may be able to do it for a while, but eventually your business reaches a size that makes it impossible for you to keep in touch with all of the details. If you have managers and employees working for you, it also prevents them from taking on some of the ownership and accountability for results with you. Even if you don't feel like you're big enough for a budget right now you will be one day. It's never too early to start a good habit.
Remember that in reality, a budget is just a plan. It makes you step out of your everyday business view and forces you to look at the big picture strategically, so that you have to take note of where you are now and plan for where you want to go. Without a formal plan to help inspire you to action, planning a budget will likely be pushed to the back burner as you spend all of your time managing daily fires to be put out.
So what's your excuse? Did your dog eat your budget? Do you need to vacuum your overstuffed sofa so that you won't have time today? Did your mother-in-law coming to visit from Idaho? Or are you ready to stop making excuses, sit down and get to work?
About the Author
About the Author: Margot Brandlin is a Minneapolis Bookkeeper for OWL Bookkeeping and CFO Services. Owl has a Bookkeeper in Minneapolis eager to take on your business finances.
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