One of the areas of the business to which less attention is paid is is the preparation of a periodic budget, either weekly, monthly or annually, but that at the same time would solve certain financial planning problems that are presented daily in our business activity.
The budget is for the administration of any company, like a map for a navigator. It is necessary to understand that the route map drawn is a projection that must be followed, but that there may be unforeseen events that cause deviations to occur. In any case, we must also understand that, just as the route we have planned for a trip is the fastest and most efficient, the budget is the estimate that must be closest to reality for effective company management.
In fact, many financial problems can arise in small (and large) companies, leading a company or self-employed person to the brink if they are not managed correctly. In this sense, budgeting is key.
Within any budget planning document, the resources to be used to meet the financial terms are defined. Thus, the budget allows us to control our income and expenses in a given period, thus allowing us to roughly estimate the company’s financial status and be able to undertake future investments that, otherwise, would not be possible.
Lacking a budget or not following it strictly implies having a lack of control of the income and expenses of our daily business activity. In the same way, if we budget with unrealistic estimates or with poorly defined priorities, it can cause imbalances in the business.
The budget also reduces uncertainty and represents a continuous business improvement challenge for the entrepreneur, who tries to balance income and expenses in the best possible way. Therefore, the preparation of the budget for the company is of vital importance.
The following steps can help you create a budget.
- Identify the amount of money you have coming in.
- Tracking your spending regularly
- Set S.M.A.R.T. goals
- Draw a plan
- Change your spending habits if necessary
- Keep Reviewing