Importance of Budget in 3 Points
Business is not a path with already decided destinations and stops, it is in fact very uncertain profession with increasing financial tensions and competitions. The numbers are not fixed in business. There are numerous ups and downs in the business, one day you are making way more profit than expected and the other you are struggling even to touch your last profit margin. Therefore, having a budget is important as instead being forced to take a good hard look on your finances after a crisis hit in your business, it is better to plan ahead to minimize the blow.
Having a budget ensure that you have enough money for all the resources. Establishing budget is all about knowing what are you able to achieve with your present financial situations without compromising any ends. But the problem is, most of the businessman do not consider creating budgets. Because most of the time they don’t think it is important and cannot see its relevance right away, this is especially case with small businessman. It is better to be prepared than to regret right, budget gives you that power. If you still think budgets are not important for you, stick here a little longer. Let’s dive in:
- Budget clears the goal
Budget enables you to be on track and making sure that everyone involved in your business is on the same page. When you define budget, it actually defines to which extend people can stretch their legs. If you don’t have a budget that is shared with all, then all of your team members will be heading in different direction and taking different financial decisions which will affect business finances in negative way. So, budget keeps everyone in line where every decisions made in business is coherent in nature and hence contributes a lot in success of the business.
- Help you prepare yourself ahead of time
Let’s face it, not every plan of yours will be successful. You may be launching super marketing scheme, but not everything will go as expected because that is the nature of business is actually. So, there may be time when you need emergency exit, budget enables you to do that.
- Budgets help you in managing business
It is popularly being said that, budget gives you a measuring scale for your business. Let’s face it, every aspect of business is measured in money, even its success and loses. So, in order to measure your progress or measure how far you can go, it is the budget that will give you an idea.
The budget is prepared on the basis of your history, what has already happened and what your think about making happen. As you progress through the year, budget will give ability to measure your progress and find out where your money is going and from where your money is flowing in, and hence you will be able to make future decisions smartly. If you don’t have a budget, you won’t be able to judge whether you reached your goal or not.
For example: if your aim is to do this number of sales and increase in certain percentage of revenue by the end of the first quarter, having a budget will allow you to see, whether you can achieve that or not. If you have a budget, you will have something to measure to as the end of the quarter to know whether you hit your aim or not. And hence, you will be able to make future plan depending upon this success or failure.
Entrepreneurs are often warned about the importance of budget and what would happen if they don’t make one. When the business is small, the importance of having a business will not be obvious at first in some cases, especially when dealing with small number, but the habit of making budget and sticking to it will take you a long way.Tags: budget, business, finances, taxes