Every decision you make in your business has a financial impact.
Would you buy a new car or move house without checking whether you could afford it first?
I really hope not!
So why do so many business owners make big decisions in their business without looking at the numbers first?
We see it all the time.
A business owner has a good month and decides to take on a new member of staff.
A nice piece of equipment catches their eye, so they buy it.
They sign a lease on larger premises because they’re feeling optimistic about the future.
Then six months later, they’re wondering where all that profit and cash has gone.
The problem isn’t usually the decision itself. The problem is making the decision without understanding the financial impact first.
A budget allows you to test decisions before you make them.
What happens if sales fall by 10%?
Can you still afford that new employee?
How much extra turnover will you need to cover a wage increase?
A budget helps you answer these questions before they become expensive mistakes.
Without a budget, you’re driving your business while looking in the rear-view mirror. You’re relying on last year’s accounts, which only tell you what has already happened.
With a budget, you’re looking through the windscreen and planning where you’re going.
The businesses that tend to survive challenging times aren’t always the biggest or the smartest. They’re often the ones who plan and understand their numbers.
If you don’t currently have a budget, don’t worry. Most small businesses don’t.
The important thing is to start.
Even a simple one-page budget is better than no budget at all.
Suzie Says…
A budget isn’t there to stop you from spending money. It’s there to help you spend money in the right places, at the right time.
Tip: Did you know that if you use Xero Grow package or above, then you get Syft Analytics for free. This allows you to develop really simple budgets, pulling through your previous year’s numbers as a starting point and adapting them for the decisions you need to make.