With Your Budget, Think Like a Hypochondriac19th October 2016
We all know someone who’s always going to the doctor, worried about their health. They’re never truly ill and it seems like they never get sick.
I don’t think it’s a coincidence. Because they spend so much time obsessing about their health, they never miss a thing.
That’s why you need to check you business’s budget more often, too.
Many businesses never revisit their budget. They draw up a comprehensive set of figures, then put it away in a drawer for the next 12 months.
That’s a mistake.
When you set your budget, you are setting your goals and spending priorities for the year.
Inevitably, things will change – there will be unexpected expenses, the areas where you want to invest will shift, you’ll bring in more revenue than expected or there will be crises and emergencies.
That’s all natural and normal; Business is hard to predict.
But the budget you set months earlier is like a roadmap showing what you expected to be spending and bringing in. It allows you to compare where you wanted to be with where you actually are.
If you find there’s a significant difference between your budget and reality, then you need to understand why that’s happening.
Think about how close you came to the budgeted figures, what adjustments need to be made, if any, and what changes should you make to improve performance.
It’s not a question of right or wrong, or good or bad. It’s simply a way to help you understand more deeply what’s happening in your business, a benchmark to measure your performance.
I recommend you looking at your budget at the very least quarterly, preferably monthly, but this could vary depending on the nature of your business. Your budget should be an integral part of your monthly management accounts pack.
Is it highly volatile? How important is it that you stick to your budget closely? If you’re working to ensure your business can make loan repayments, for example, the risk of falling behind could be high. Depending on your needs you might need to look at it very regularly.
That’s no bad thing. Just like the hypochondriac whose obsession with health keeps them healthy, keeping a close eye on your financial figures will keep your business healthy, too.
You’ll get a deep understanding of what’s really going on – and never miss a thing.
If that’s a result you’d like to see let’s chat. The more insight you have into your own business, the more success you’ll see – and we’d love to help get you there.