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The Dog Ate It (and Six Other Excuses For Not Having A Budget)

Jan 23, 2008
Year-end always brings a significant list of financial tasks to complete. We start thinking about closing the books, organizing taxes, selling investments, enrolling employees in benefits and establishing budgets.

And when that list gets long or one item seems overwhelming, human nature kicks in and it's not often pretty. Nowhere have I see business owners procrastinate more or make more excuses than when I bring up the topic of budgets. So determined are they to "get out of" putting together a budget that they've offered up everything short of a permission slip from their mom to be relieved of the obligation.

Here are some common excuses for not organizing a budget, and why you should make one anyway.

Excuse 1: Budgets aren't flexible enough, so that it's impossible to stay with initial limits for the entire year. In fact, your budget doesn't have to be cut and dried. You didn't swear on your grandmother's best brownies that you'd stick with it no matter what. It's yours and if needed, you can be flexible with it. However, you should not just make a budget and then ignore it. It's estimated that up to 80% of companies who create budgets don't change even one detail during the fiscal year. In fact, that's not realistic. Not only is it possible for you to change your budget as circumstances require, but it's necessary. If appropriate, perhaps budgeting every quarter instead of yearly would be a better option for you.

Excuse 2: If I have a budget, I can't be as flexible in the event of a crisis. In fact, if you have a budget in place, you'll tend to be more proactive and flexible, not less. This is because a budget can help you foresee problems and take steps to stop them, sometimes before they even actually occur. Or, if problems do occur, you can probably catch them earlier while still small and therefore much more fixable, before they become full-blown crises.

Excuse 3: Budgeting is too complex and takes too much time. While this might actually be true for some companies, it doesn't have to be so. It's true that many companies sweat extensively over their budgets; some even devote as much as 20% of their management's time to creating those budgets. It's true that a certain amount of detail is going to be necessary if the budget will be effective. However, the budget itself can often be quite simple. In addition, the time you invest in this type of planning will never be wasted, because you'll save yourself time down the road when you need to react in the moment for split-second decisions that must be made.

Excuse 4: Things change too quickly in my industry for me to commit to a budget. Sorry. Conditions change at break-neck speed in every industry, and it's not a valid reason to excuse yourself from planning for the future. A budget doesn't ask you to predict unknown events (i.e., Will gas prices go up? Will I have turnover in staff? Will new legislation be passed that impacts my business?). A budget requires you to look at the big picture and commit to the goals you want to achieve and the actions you plan to take - things that are largely under your control. If you're unable to look critically at your business and determine what it is you want to accomplish in the next 12 months, you need to ask yourself why that is.

Excuse 5: Budgets don't mean anything. Everyone just creates the numbers they want so that the picture they paint is perfect. It's true that if you construct your budget based on unrealistic terms and goals in hopes of inspiring yourself to actually reach them, in fact this is a sure way to invite frustration and failure into your life. In fact, one Internet post compared budgets to pornography, saying that they were a fantasy based on what the author wanted the world to look like but with no connection to reality, and "designed to titillate, stimulate and motivate the reader, but ultimately resulting in a sense of alienation and despair." If this is your intention when you set up your budget, it's of no use to you. To help you, your budget needs to be based on reality.

Excuse 6: I have a budget that I keep in my head instead of on paper. Of course, it's good if you can keep a running total of a few figures in your head for quick access if you need them. However, it's not realistic to be able to do this for every expense, number and project. You might be able to do it for a while until your business reaches a certain size, but eventually it will be too much to keep all the details straight just in your head. In addition, if you have people working for you, you're keeping them from taking some responsibility and accountability for your business' success or failure along with you. Even if you think you're of a small enough size that you don't need a budget right now, you will someday. Start good habits now and begin to keep one while your business is small so that it will be second nature when your business grows.

Remember that in reality, a budget is just a plan. It makes you step out of your everyday business view and forces you to look at the big picture strategically, so that you have to take note of where you are now and plan for where you want to go. Without a formal plan to help inspire you to action, planning a budget will likely be pushed to the back burner as you spend all of your time managing daily fires to be put out.

So what is it? Your dog ate it? You need to shampoo your hair and won't have time? You've got relatives in from Iowa? Or are you ready to drop the excuses and start crunching numbers?
About the Author
Author: Margot Brandlin is a Minneapolis Bookkeeper for OWL Bookkeeping and CFO Services. Owl has a Bookkeeper in Minneapolis ready to take on your business finances.
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