What Are Your Excuses for Not Having a Business Budget?
If you own your own business, no doubt the end of the year brings you not just the holidays, but a lot of work to complete. You’re probably thinking about wrapping up the books, selling any investments, organizing documentation for your taxes, setting your employees’ benefits up, and creating your budgets for next year.
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 common excuses for not organizing a budget, and why you should make one anyway.
Excuse 1: Budgets are too confining; I can’t stick with my initial estimates for 12 months. It doesn’t make sense to create a budget and then disregard it, but here’s news: your budget is yours. You don’t file it with the IRS, you’re not legally bound by its contents and you (hopefully) didn’t make a pinky-swear promise to adhere to it with unwavering exactness. By some estimates, almost 80% of companies that create budgets don’t change them even once during the fiscal year. That’s not how things work in real life. You can and should change your budget as circumstances require. Budgeting for a shorter timeframe, such as quarterly, might even be a viable option for you.
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: Budgeting is too complex and takes too much time. While this might actually be true for some companies, it doesn’t have to be so. It’s true that many companies sweat extensively over their budgets; some even devote as much as 20% of their management’s time to creating those budgets. It’s true that a certain amount of detail is going to be necessary if the budget will be effective. However, the budget itself can often be quite simple. In addition, the time you invest in this type of planning will never be wasted, because you’ll save yourself time down the road when you need to react in the moment for split-second decisions that must be made.
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. Everyone just creates the numbers they want so that the picture they paint is perfect. It’s true that if you construct your budget based on unrealistic terms and goals in hopes of inspiring yourself to actually reach them, in fact this is a sure way to invite frustration and failure into your life. In fact, one Internet post compared budgets to pornography, saying that they were a fantasy based on what the author wanted the world to look like but with no connection to reality, and “designed to titillate, stimulate and motivate the reader, but ultimately resulting in a sense of alienation and despair.” If this is your intention when you set up your budget, it’s of no use to you. To help you, your budget needs to be based on reality.
Excuse 6: I have a budget in my head, but not written down. While it’s useful to be able to keep certain figures in your head for easy access, if you try to keep track of everything mentally, that’s overly ambitious. If your company is small enough, you’ll be able to do this for awhile, but eventually it’s just not going to be possible. In addition, it keeps managers and employees from being able to take ownership of some of the results themselves, and also lessens their own sense of accountability. Even if you don’t think your company is big enough to have a formal budget just yet, it will be one day. If you sit down and establish creating a budget as a good habit now, it will be much easier to continue it when it’s a necessity.
Remember, budgeting is simply planning. It forces you to step out of the day-to-day details and look strategically at your business, to take stock of where you are and to set a goal for where you want to be. And let’s face it, without a formal tool in place that nudges you to action, that kind of planning is likely to take a back seat to all the other daily crises that demand your attention.
So what is it? Your dog ate it? You need to shampoo your hair and won’t have time? You’ve got relatives in from Iowa? Or are you ready to drop the excuses and start crunching numbers?
