One of the gravest mistakes small businesses make with budgeting is putting it to sleep once it’s done. If you have this mindset, chances are you’re not being guided by it in your day-to-day running of the business. In this post, we’ll guide you on how to execute an effective budget review.
1. Set aside time
It shouldn’t be a quick glance at ‘where we want to be’ and ‘where we are now’. Make time for it and be generous with the time you’ve given the exercise. With regards to anything that captures your attention, you’ll need to ask the question: “How does this impact the business?” After all, that’s the reason for preparing a budget. Unless it helps you to drive the business forward, don’t bother wasting time on it.
2. Keep the big picture in mind
Don’t be penny-wise and pound-foolish. While you should scrutinise the budget, an increase in the cost of postage stamps will not run the business aground unless you’re running a post office. If you’re running a restaurant, an increase in the cost of casual labour should raise alarm bells. It could be a result of inefficient kitchen operations or the business has boomed and you’ll need to look at how things can be done more efficiently.
3. Put things in context
As a business owner, you’re constantly looking at driving sales and revenue. It’s the easiest indicator of growth and success. But putting in wishful numbers to achieve and holding everyone, including yourself to it, adds unnecessary stress. Learn to look at numbers in relative terms by putting them in context. Aiming to achieve a 30% growth at a time when uncertainties prevail in the larger environment is wishful thinking. So, be mindful of what’s happening out there when reviewing your budget.
4. Own the numbers
It starts with you owning the overall budget. It then trickles down to others, both internal and external stakeholders. For example, the sales team has to own the targets set for them and operations must strive to achieve the productivity targets. Unless you spread the responsibilities, you’ll find yourself spread too thin.
5. Seek help when you need it
Propeller undertakes monthly and quarterly meetings with clients to review their budgets and results. Get in touch if you’d like to take up this service!
