Even a person who doesn’t know the first thing about business is aware that the way in which you handle your finances is one of the most important factors of your success. Because of this, most future startup owners spend 90 percent of their planning stage trying to come up with a solid budget plan. This makes it even more surprising once it turns out to be a complete disaster.
With this in mind, here are top 5 reasons why your business budget is failing as well as few tips on how to make it better.
- The lack of flexibility
The first thing every young business owner needs to keep in mind is that no matter how hard they try to include every single expense in their business plan, it is highly unlikely they will ever achieve so. The hidden expenses are usually quite formidable, but even without them, you can only plan so far. The problem with smallest businesses lies in the fact that their budget is already so tight that a single oversight might cause it to break. This is why most experienced business owners know that one of the strongest features of any budget needs to be flexibility. This means prioritizing expenses and trying to rethink your budget at least once every few months.
- You aren’t updating it
The tip mentioned at the end of the last paragraph brings us to our next problem – you aren’t updating it often enough. The circumstances constantly change and in few months your business might become more or less lucrative. The market can alter itself completely or even more likely you can make a decision to radically change one of the aspects of your business. Needless to say, your budget needs to be able to keep up with all of these occurrences and failure to do so may cause a critical failure. It would, therefore, be advisable to revisit your budget on a monthly basis.
- Not pulling the plug in time
Another thing you need to know is that sometimes things are simply beyond the point of repair. By the time you get some professional counseling, uncover a hidden error in the system or even uncover a fraudulent behavior within your own file and rank, it might already be too late. When faced with such an issue, it might be for the best to simply pull the plug. Still, before you make any rash moves, it might be worth your while to schedule a meeting with experts behind a renowned corporate insolvency firm and see what they think about your situation.
- Protecting instead of reducing cost
Even though it is recommended that most businesses need to become frugal in order to remain solvent, being money-wise is not the same thing as being cheap. Don’t think of the money as an end goal, but as the key resource that will help get you where you need. You need to spend your capital in order to improve the standing of your company on the market. Because of this, you should never hold back from passing what is left into your budget for the following period. Remember, what’s in the budget is there in order to be used (spent). Not doing so is a sin that won’t go unpunished.
- Unethical behavior
Let’s face it, sometimes the cause of all your financial issues will be the fact that someone (not necessarily you) is cooking the books. Managers and accountants who believe that the state of their finances in shambles might sometimes try to make things better by pretending that their business is doing much better than it actually is. In other situations, they will do so for personal gain. Still, the investors, partners and clients won’t just take their word for it and in time they will demand to see the ledger. They will, therefore, try to hide this failure by cooking the books. This, however, represents nothing but delaying the inevitable and the sooner things are out in the open the less damage will be done.
It is quite devastating that the five items on the list above are nothing but a tip of the iceberg of all that can go wrong with your budget. For example, giving up on tracking expenses, focusing on the prize, too much guesswork and not planning for an emergency are just some of the things we didn’t get to mention. Sure, making a budget is not exactly a rocket science, but it isn’t an easy thing to do either. After all, not everyone was meant to success and for most people, this will be the first and the ultimate test.
Leila Dorari is a marketing consultant and a freelance writer from Sydney. She has been working with different companies for 5 years now. When taking a break from making new marketing slogans, she is either window shopping or exploring new ways to make her life more meaningful.