Budgeting
Posted on November 28, 2012 by Mark Nuelle
Sharing a post from B2b Partner, Anthony Valentino:
With the start of the New Year, many of us will look for ways to improve our lives by making a New Year’s Resolution. A New Year’s Resolution is a goal, hopefully a well thought out goal with plans on how to accomplish it.
What goals have you created for your business for the New Year?
Your business’ New Year’s Resolution is actually called a budget. Most of us have experience with the budgeting process for a business. Many times the process has not been a pleasant one, so there may be a tendency to avoid creating a budget. But if we avoid a budget then we may be avoiding a great opportunity to supply direction and goals for the improvement of our business over the next year. There is only two ways any organization can move: forward or backwards.
Each area of a budget should be backed up with a goal and then an action plan to support the goal.
The budgeting process doesn’t have to be difficult. Here are a few areas to focus on.
First – What are your estimates of sales for the coming year?
Obviously most of us will say, “If I had a crystal ball, I would be rich.” But think about the trend you have been undergoing in your business.
The Goal…If the trend has been down, then your goal should be to reverse the trend and either hold your ground or have a modest improvement. If your trend has been up, look at the improvements attained over the past couple of years and use this as a guide.
The Action Plan…What opportunities do you see with current customers as well as new customers? What activities will provide opportunities? Plan them out and move forward.
Second – What expense areas need to be reviewed and improved?
We should always be looking for ways in our organizations to be more effective in what we are trying to accomplish.
The Goal…Maintain or improve labor as a percent of sales. We all want to give our employees raises. But these increased wages can’t be a source for dilution of the company’s health.
The Action Plan…A service organization may look for ways to streamline processes in order to serve more customers without increasing costs but still maintaining a high level of service. A manufacturing organization will look to efficiencies in labor to get more product through the door without significantly increasing personnel or overtime.
Third – Review your fixed costs?
Sometimes fixed costs are not fixed at all and have a tendency to balloon as our organization grows. Review all these costs and determine what the appropriate level for your organization should be and then communicate to each individual in the organization what they can spend for the coming year. 
Once you have a great budget put together with actions plans, make sure to review the progress being made on a regular basis. A periodic check up will keep everyone on the same page and focused on the company’s goals.
