It is that time of the year again when you have short-listed a handful of strategic plans for the year ahead. It is now time to put these plans into action. But before you jump into their implementation, there is just one more ‘very important exercise’ that you need to carry out – budgeting!!!
After all, it is a budget that will specify the resources, revenues, and activities required to carry out the strategic plans you have so carefully chalked out. Here are a few tips that can help you make a good budget and enable you to take off with your plans:
• Be Goal-Oriented:
Your budget should be your holy grail. Period. Abide by it and you will see that you are inching towards the goals that you have set out for, be it ensuring cost-effectiveness, increasing revenues, plugging leaks, etc
• Be Realistic:
One of the biggest reasons for a budget’s failure is the laying down of unrealistic goals – for instance, decreasing expenditure unrealistically or anticipating sky-high revenues without the backing of proper data. As you set out for this year’s budget, refer to your last year’s incomes and expenditures and make a judicious assessment of what the items under both these heads are like to be for the current year. Highlight any anticipated windfall gain or a major expenditure such that it doesn’t wreak havoc during the course of the year.
• Be Flexible:
A vital part of budgeting is to create a ‘live’ spread-sheet that ropes in unexpected increases in income/expenses, or allows you to take advantage of opportunities that present themselves. Hence, make sure you get on-going reports on your budget vs actuals.
In addition to a column that totals your income and expenses, create a column that tracks and shows your average monthly spending, one that compares it with your budgeted monthly spending and one that projects where you’ll be at the end of the year based on your current income and spending.
• Share it With Your Team: You cannot keep your budget to yourself and expect success at the end of the budgeting period. In order to make it a success, you will need the buy-in of your team and their willingness to abide by the projections made in the budget.
However, this doesn’t mean that you need to share qualified/confidential information with all and sundry in your business. Make a list of the goals that can be made public and share the same with the team. Discuss with them the changes required and get them involved in order to accomplish those goals.
• Refer To It At Regular Intervals: A key to your budget’s success is the comparison of actuals versus as budgeted at regular intervals. Chalk out a timeline within which you will refer to your budget.
This could be weekly, fortnightly or even monthly, depending upon your business’s requirements. Periodical assessments will help you stay in course and achieve the near-term goals you had inked out earlier in the year We would like to know about your budgetary practices. Do write to us to tell us what works for you and what doesn’t.