This is a good time of year to think about your current financial performance, and to start planning for next year. Budgeting is an excellent way to start that planning process. This blog is the second in a two-part series on budgeting; in the first post we discussed WHY you may want a budget for your business, and in this post we will discuss HOW to create one.
How to create a budget – best practices
1. Involve others.
Budgets are used to project revenues, spending, and profit margins, and the budgeting process forces you to think about not only your business’ vision, but also its strategy and areas of execution. The best way to get realistic and practical input is to involve people from different areas of the organization. You may want to have two budgeting sessions – one at the C-level to discuss the macro goals, and then one at the manager level to discuss strategic execution/micro goals.
2. Use a spreadsheet or budgeting software.
Don’t re-invent the wheel. There are many programs out there to aid in the budgeting process. If you are comfortable with Microsoft Excel, then it is easy to create a simple budget in Excel or to use one of its pre-programmed budgeting templates. If your budgeting needs are more complex, then it is typically worthwhile to make a short-money investment in budgeting and planning software.
3. Be flexible.
For a budget to be useful, it is important to be flexible and adjust your business expectations and needs as circumstances dictate. If your revenue goals were too optimistic, then adjust the budget downward so that it is still a useful tool and to keep your team engaged and incented. If your revenue goals were too light, then this is a good short-term problem to have, but you should adjust your annual goals to reflect the new reality. Don’t let pride get in the way of success!
4. Consult a professional.
There are many professionals who can assist you with the budgeting process. For many businesses, it makes sense to engage a pro early on, and then you may have a template or foundation that you can use for future years. Accountants, some attorneys, financial advisors, and budgeting consultants are all sources of information for you to consider.
For assistance with budgeting, or with any other legal needs related to your business or estate planning, contact Fournier Legal Services for a free consultation at email@example.com or 860.670.3535.
Joe received his law degree from the University of North Carolina–Chapel Hill School of Law and his Accounting degree from the University of Rhode Island. He is admitted to practice law in Connecticut, Massachusetts, and Rhode Island, and he is a CPA. He is an Adjunct Professor and lecturer at the University level and has been a frequent speaker on business planning and legal matters.