If you are anything like me, the word budget keeps you up at night. When it comes to business budgeting, it is less about doing it right and more about not doing it wrong. I am certain that even the best budgeters have had nightmares about budgeting for their business. It is simply part of the process. There are three big mistakes that can make those nightmares a reality.
Mistake # 1: Overstated Projections
If there is one thing that I hope you will remember in all of this it is that you should always be realistic. One of the biggest mistakes that you could possibly make is applying your wishful thinking and optimism into your projections.
When it comes to budgeting, you should always round up’ for your expenses and practice conservatism with your projections. It will keep you from disappointment and disaster. Doing this will also give you room for a pleasant surprise when things go better than planned.
Mistake # 2: Ignoring the Now
Another trap that can easily snag you is looking too far ahead without giving thought to the financial requirements of your business right now. A lot of people get caught up in looking at the future of the business budget and overlook their current needs.
The truth is that there are always expenses. When you sit down to work out the details of your budget, be sure to take the immediate expenses right off the top before you make grandiose future plans.
Mistake # 3: Thinking that Revenue Means a Positive Cash Flow
This is yet another area in which optimism can kill your budget. Just because you have money coming in does not mean that your business is in the green. It is, of course, a great relief when you see your efforts paying off. You must remember, though, that you cannot run a business for free.
Your advertising, overhead, and other expenses can add up quickly. Be sure to keep an accurate record of all of the money going out so that you can have a clear picture of the amount of money that your business is actually making. Never forget that profit and net profit are very different.
This brings another important point: flexibility is key. You should always leave room to make changes when your strategy is not working the way that you had hoped. Pay attention to your ROI (return on investment) every step of the way.
Never Stop Setting Goals
If you can keep from making these three big mistakes, your business will be safe. It might sound silly but the key to consistent growth and learning is re-evaluation and goal-setting. When things are going well, shoot for the stars, and set goals with the purpose of inspiration. When the chips are down, you should re-evaluate your goals and make them more realistic.
This is a tricky balancing act, but with some juggling, you can make your dreams a reality.
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Do not underestimate the value of a professional bookkeeper. There is so much that goes into running a business that the meticulous care and organization that bookkeeping requires can be difficult. That is where BlueFire Accounting comes in. Go ahead and book a free strategy session. You will not regret it.