You need to run your business successfully. You need to have an understanding of Budgeting, because if the finances aren’t right, then you will be looking at big, big trouble. So here we focus on how to develop the people skills you need, as well as the people, to run your business or organisation successfully. And it’s bigger than just the bottom line.
That creates the slant so important about how money and Budgeting operates in business. Money; finance; Budgeting through the eyes and ears of your people and your customers – to everyone’s mutual success.
Hope this sets you thinking…
Top Ten Things About Budgeting
Every business has to get the balance between income and outgoings right or they will cease to exist – and all the great stuff you do to grow, will be for nothing. But there is every opportunity for people-focused activities to help you here.
So, those best at Budgeting…
- Get the Picture
Have a clear understanding of the financial resources they need for all the costs they are going to incur.
- Communicate Well
Tell their people. By being open about what they can afford and the challenges they face. Their people help them because they keep in touch.
- Set Waypoints
They make sure that they know regularly how they are doing. Be it through computerised systems, good bookkeeping (definitely a worthwhile spend) or just bank statements. They are always up to speed and tweaking costs to match income.
- Are Business Focused
Financial decisions are decisive and relevant. No time is wasted in making challenging decisions. They appreciate the importance of the bottom line and act accordingly, whilst being very aware of the ‘big picture’ in the future.
- Understand ‘Value’
And one of the questions they ask, when assessing expenditure is, ‘Is this a value-creating cost?’ – ‘Is it a good cost?’. If not, they don’t do it. They eliminate the bad cost drains on their resources.
- Provide Resources
Yet, from other pages you have seen here, a good ‘boss’ understands the needs of his people, who have to have appropriate resources (including their personal financial rewards) to do a great job. They realise that there are some things not to skimp on and times to just ‘trust’ their people.
- Are Determined
This is not a game or a place for weakness. These people who are great at Budgeting realise that getting this bit right is very, very important. In larger businesses they recruit people who are better than they are at this. In smaller businesses they have outside help – accountants; bookkeepers; bankers etc., who they have selected for their qualities. Their ‘Best Team’ is outside.
- Keep Their Eye on the Ball
In the hustle and bustle of tactical decision-making, those top notch in finance management are always aware of the implications of everything related to their business or organisation.
- Generate and Use Data
Another area where they excel is that they have people who can give them the data they need, when they need it. They shape up their systems to provide the information they need to get their Budgeting right. It is a priority. And if they don’t have a passion for this area of their business’ they employ someone who does.
- Are Numerate
Although there may be others around who can so the sums, the best in Budgeting have a good sense of the numbers and use it well.
Ten Ways to be Better at Budgeting
- Have a Plan
However simple it is, you need to have a forward plan of expense and income. Be it an Excel spreadsheet template, or an old exercise book, it doesn’t matter as long as it is complete and you understand it. Simpler the better.
- Define Guidelines
By making it clear what your spending can afford and can’t – and publishing it, you will have less grounds for complaint or demotivation from your people.
- Be Open
Talk them through these first two areas, get them involved. Your people will provide support and enthusiasm in your business or organisation if they are kept aware.
- Review Regularly
And once you have a plan – keep it up to date, measure shortfalls or overages and adjust the budget accordingly. To avoid one-offs, also have a rolling annual budget to show trends rather than isolated hiccups (though be aware of them too!)
By working together with your people in managing your financial progress, they will be much more disciplined. Bridge the gap or any ‘us and them’ by being on the same side and including, rather than excluding in debate.
- Value It 1
For discretionary spending – generally keep it to a minimum. But where opportunities come to you, make decisions based on whether it is a value-creating investment. You may need to be broader in your thinking here, as sometimes it’s hard to measure absolute value to the bottom line (especially with ‘people’ things).
- Value It 2
Your time. By being the leader/boss/manager, you need to expend your time where it creates the best value. If as a small businessman, you are great at selling, then why waste every Monday afternoon with the books – get a bookkeeper! Do the figures on it. What does it cost and then, what do you bring in? Then decide. Build in a team of experts for those areas which are not your strengths or you just hate doing. It may be experts outside your business or particularly able people within.
- Be Strong
If your numbers start to struggle, make sure that you react fast. Prevaricating over what to do and when will cost you dearly. So have all your systems in place and respond quickly and fairly to unexpected difficulties.
- Be Honest
Most importantly, with yourself. You are the easiest one to fool. Sometimes, you will fool yourself by just not knowing (the ignorant and naive approach); sometimes you’ll pretend not to notice or tell yourself that things ‘will get better'(the ‘head in the sand’ approach). This won’t do at all. Big lesson. Be honest with yourself.
- Have Fun
Above all, in your ‘hidden budget’, make sure that you have funds to share with your people as celebrations and rewards. Don’t be seen to be mean here – it builds the future of your business if your share your success.
5 Simple Actions You Can Take Today!
- Get the data you need right now to make a start (if you don’t have the data – work out how quickly you can get it and arrange it).
- Meet with your people and explain how Budgeting affects the business and how you need their help with it (they will respond to that). Check out who in your current team has the skills to make Budgeting easier for you and delegate.
- Evaluate where you spend your personal time and whether every minute is value-creating in some way. In the business or on the business.(Checkout The E-Myth Revisited – Michael Gerber)
- Set up regular review dates, red-circle them in your diary, co-plan a programme with your people and stick to it.
- Decide what will be fun to do to use some of your budgeted resources for. This is not an area to skimp on.
Finance for Non-financial Managers in a Week – Roger Mason
Successful Budgeting in a Week – Malcolm Secrett
Understanding Business Accounting for Dummies – UK Edition – Colin Barrow & John Tracy