Budgets Are Forever

This is a common time of year for many small business owners to create a budget for the upcoming year. Forecasting sales and expenses for each year of the month is the best way to stay ahead of unexpected swings in income and expenses. Without a plan you may never realize things are veering off course.

Setting up a budget for a 12 month period is good, but rarely does a years time of projections follow what you planned. A budget is your best guess at a fixed point in time of how things will be in the future- no one is really good enough to foresee all the things that will change 12 months from now.

Because of this, I recommend resetting your budget every three months. This will allow you to take into account the new trends that are showing up and rebalance by cutting expenses or adding investments into positive results. Post your actual results every month right next to your budgeted numbers and then at the end of every quarter create a summary of that period. Then adjust the upcoming months with the changes you see.

Staying ahead by making ongoing adjustments is the key to running a profitable business and it eliminates those ugly surprises that can be so costly. So, never stop the planning!

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