What NOT to Do (Part 5): Bookkeeping Edition
I know I will hear some groaning on this one, but hear me out. I realize that budgeting is something that most people run from. (I know, I said the “B-word”!) You will most likely still survive if your business doesn't make and follow a budget, but this can be the difference of your business being average and being great. Today's mistake you should avoid: not having a budget (on paper, on purpose), not looking at it, and not following it.
Let’s say you are going to build a house. You have a construction crew, and materials, but no plan. Inevitably, your house is not going to come out a house in the end because there was no plan, no goals, no foresight into what needed to happen to get where you wanted to be.
Now, think back to a budget. It is a plan that you create. It forces you to do some forward thinking and make goals. It helps you determine steps to get to your goals. In order for it to work in all these ways though, you must actually look at it and follow it. It is no good if you just write it down and never do anything with it. Similarly, you need to use your actual real-life numbers, not imaginary ones that you would like to see *someday*.
If you are paying attention to your numbers (income, expenses, cash flow, accounts receivable, accounts payable...), then this causes you to live in reality and be a better business owner, able to make better decisions. This is a huge reason why having & following a budget is a key for success for so many business owners.
What about you? Do you have a budget, but don't look at it? Do you not have one written at all? No matter where you're at, it is okay. Sit down. Take a deep breath. Now first go look at your accounting software and see if it has a budgeting feature already built in. This will simplify your process. If it does not, take a look at your accounts. Your financial reports will have a lot of the information you need as well and this is a great opportunity to use them! Before the next month/quarter begins, make a plan of what you know you need to spend money on, and where you want the leftover to go. This is the beginning, but if you need help, contact me and I’d love to walk you through making a budget, as well as monitoring it after it’s written. Having a realistic picture of what your numbers are right now can help you make changes for what you need to do to get to where you want to go in the future.
Do you want to be AVERAGE or do you want to be GREAT?
This is one huge way to better your business because it helps you to have a plan for the future and be proactive, rather than reactive!
(Side note: I also recommend you have a separate budget for your personal expenses also)