A budget simply put is a financial plan created to enable companies to better manage their monies. Now more than ever amid the covid pandemic having a frugal yet flexible financially structured budget is critical to the sustainability of any company. The flip side of not having a budget will only lead to poor decision making, many a stressful days and nights, your monies controlling the business instead of you controlling the monies and can eventually lead to the business going bust.
Having a fully focused picture of the company’s financial plan through your budget eliminates the guess work on the prioritization of monies when tough decisions must be made. How often these pictures may have to be taken is contingent on the circumstances and needs of a company. It goes without saying however that a budget process should be had every year, requiring all department levels to submit how they propose to follow, manage, commit to and improve their departments financial objectives while keeping inline with the company’s overall goals.
In this economic climate we are experiencing not having a budget is akin to driving in a torrential down pour, you know you are on the road but can’t see one foot in front you. You turn on your wipers and defogger (try to implement financial safeguards) however they don’t work. The only thing left is to drive at a snail pace and watch as those who did plan (your competition) pass you by. Budgets are a company’s financial forecaster; it forces you to seriously look down through the year analyzing and strategizing for the approach of the inevitable different seasons.
No company is ever started with failure being the goal. However, sliding down the slippery slope to hitting rock bottom will inevitably happen with the loss of financial control. The company becomes like a leaf in the whirlwinds trying to pay off its creditors, meet labor costs, purchase much needed supplies, fund marketing campaigns, increase revenue etc… The loss of financial control can be avoided or eventually turned around by mandating a consistent review process of the Cash Flow Budget, Operational Budget, Marketing Budget and Financial Budget. While each of these individually have their distinctive purposes no company can really climb its way back to solvency without ensuring that collectively they are intrinsically interwoven to achieve a singular purpose.
Outside of the financial needs budgets are: (A) Great performance evaluation tools, for those who are responsible for their creation, implementation, and adherence when targets are met and/or surpassed can be recognized accordingly and those who fail to achieve their objectives will also be coached and counselled. (B) Budgets are also a consistent reminder to all leadership personnel of the continued high level of accountability that is required to ensure that company does not flatline. (C) Budgets when taken from paper and put into action enhances the communication synergy within and between all departments, bringing about the realization that the company’s strength and ultimate survival is dependent on the whole being unified. (D) Budgets can and should be used to generate greater buy in from the from the C Suite all the way down to the frontline staff, more than ever now during these unpredictable and unstable economic times.
Ultimately the implementation of a budget and the processes are in the hands of a relatively small number of individuals in relation to the size of the company. It is important to remember that every employee though arrives with their personal hopes and dreams, which now become tied to the financial success of the company. To those relatively small number of individuals the choice is yours, Budget or Bust.
Keith M. Dean
CEO & Founder
The BusinessofU
www.thebusinessofu.co