Creating a budget is one of the more challenging chores you must undertake as a business owner.
Right up there on the list, though, is adhering to your budget. If you’re a sole proprietor and have total control, there are steps you can take to make your budget work.
- Be diligent about tracking income and expenses. This is always important, but it’s especially crucial when you’re living within a budget. Are you using an accounting application? This would shave time off your bookkeeping and make it more accurate and up-to-date.
- Always know where you stand. QuickBooks Online has a report called Budget vs. Actuals that can be customized using numerous filters. If you use QBO, run this report regularly. If you don’t, set up a spreadsheet or do this manually.
- Establish acceptable variances. You can’t expect to hit your budget numbers on the nose. But you should determine how far afield you can go before it’s time to curtail expenses and/or find ways to bring in more revenue.
- Create an ongoing list of action items. What will you do when a line item hits the variance percentage you’ve set? Don’t wait until it happens: Dedicate a paper notebook or electronic file to just this purpose, and add to it when you think of something.
If you have employees, you lose some control over your budget. This means you must double your determination to stay informed. You must also instill your sense of doggedness in others.
- Don’t keep budget numbers secret. If your employees have goals, income and expenses will be in the back of their minds as they’re purchasing and selling. Don’t share the entire budget with anyone since it will contain sensitive information like payroll, but let them know there are numbers they have to hit.
- Break it down. Try not to overwhelm your team. Don’t give them an annual figure for the budget in their specific areas. Sales teams often work on weekly and/or monthly quotas. Decide what works best for you, and follow up with each employee who has a goal using that time frame.
- Work budget adherence into performance reviews. You should absolutely do this for anyone who makes spending decisions and/or has sales goals.
- Reward employees who hit their targets. Workers thrive on praise but try to provide at least a small, tangible thank-you item. Lay in a supply of low-dollar gift cards for short-term goal achievers, and do a bit more when an exceptionally challenging objective is achieved (pricier gift cards, an extra day off, event tickets, etc.). Include the cost of these incentives in your budget.
Practice Good Financial Hygiene
Whether you’re working alone or with a staff, remember to revisit your budget regularly to troubleshoot.
To make budgeting work, you need to be diligent about your core bookkeeping practices. If you’re struggling with the basics, attack them first. Contact your MarksNelson professional at 816-743-7700, and we’ll be happy to help with any and all of your accounting work.