Think your business is too small for you to bother with a budget? Actually, every business needs a budget it can stick to, no matter what stage of growth it’s in.
Unfortunately, however, a lot of small businesses take a “we’ll-deal-with-it-later” approach to budgeting. This is often because there are too many other pressing issues to tackle, like acquiring new clients and managing internal operations. So, creating a budget slips down the to-do list.
Or, there may be a budget for the business, but it’s completely unrealistic or based on inaccurate financial data. So, it ends up getting tossed aside and forgotten. In other words: it’s completely pointless.
If either of these scenarios sounds familiar to you, then that means your business is flying blind when it comes to its finances. This doesn’t typically lead to a happy ending for any business, big or small.
Below are three reasons why creating a realistic budget is important for every business, in every industry, at any stage.
Why every business needs a budget, like, yesterday:
Prepare for the unexpected
When you create a budget and stick to it, you’re able to rest easy knowing that if something unexpected happens (which should always be expected), you’ll have a financial cushion to keep your business afloat. Your budget should allow for an emergency fund that will sustain your business for at least six months if needed.Your budget should allow for an emergency fund that will sustain your business for at least six months if needed. Click To Tweet
Rein in expenses
If you’re wondering where your money is going every month, a budget is sure to shed some light on the problem. It’s the quickest way to identify any financial holes that need to be plugged, so you can be sure your money is getting put to good use.
Insufficient cash flow is one of the top reasons why businesses fail, and you can’t have steady cash flow when your expenses are out of control.
Track your progress
As your business grows and has more stakeholders involved, you’ll be relying more and more on your financial data to demonstrate your business’s growth. This is key to not only wooing new investors but keeping your current investors happy.
“Budget” is not a bad word!
The word “budget” has got a bit of a bad rap for being the killer of joy and happiness, especially for smaller businesses who have embraced their freedom and consider budgets to be too…well, corporate.
But here’s the reality: A good budget is designed to help prepare your business for sustainability and growth, and you simply can’t put it off if you want your business to succeed for the long haul.
Need some help creating a budget? Check out our 3 Tips on Creating a Budget for Your Business.
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