So you want to end the year with a bang and you are super focused on tying up loose ends. You want to do better next year and if possible, be more efficient, more professional. Yes now is the best time to start thinking about the coming year and its also time to take a look at your current year’s financial management figures and ask yourself a few questions regarding your budget. How have you fared so far, in reaching your goal? Was your budget off track? Did sudden expenses take you by surprise? What expenses sprung up? Could you have avoided them?
Here are some common financial management and budget mistakes you make- so avoid them in the future
You do not have a budget
Having a budget is a must when you are running a business. Its not just enough if you have only a goal. There must be a formal plan on how you are going to reach that goal. Having a budget will give you a clear cut plan to reach an intended target. Without a financial plan you are operating in the dark. You are trying to hit a target you cannot even see. Ever tried to shoot a dart at a bulls eye in the dark? Its an impossible task, unless you can see in the dark.
You don’t bother to keep track against your actuals
When you have prepared a budget, you need to compare it regularly to check whether your business is performing on par. Goof financial management requires that this should be done at least once in three months. Otherwise you will have no idea as to how good or bad your business is. Comparing your budget with what you actually have in hand helps you understand in which direction your business is going and trending over the year when compared to industry competitors.
You do not follow your budget
If you have created a budget, following it is an emphatic must. Nothing could be worse than making a budget and ignoring it. It is as bad as not having a budget at all. Now ask yourself- Would you climb a mountain without a guide? Would you busy a house without determining a price beforehand? No. So why would you operate your business without a financial management plan? When you follow your budget you will see clearly how well you are doing in your business and it will assist you in managing your cash flow better and you can make changes as required.
Your budget did not include seasonal fluctuations
You need to be realistic when you create the budget for your business. Check how you performed in the previous year and base your projected numbers on those. There are hard value numbers and show how profitable your business has been. You also have to include the seasonal fluctuations and the tax part of it. Work the factor of seasonality into your budget to cover the expenses of the off months.
Don’t Under Budget
Be very careful not to under budget. Do not underestimate the costs. You also have to budget for the unexpected and the emergencies. So always have a buffer. This way you can manage your business without strain.
You may have made budgeting and financial management mistakes in the past and have learned lessons from them. But this year, plan a clear and accurate budget, follow it and leave room for the unexpected and the seasonal highs and lows. You will find that running a business with a budget is easier and more profitable.