Don’t Blow Your 2018 Budget!

As you begin the year, you’re probably developing a new budget for your business. No matter how much you sell, there’s no quicker path to a cash shortage than bad budgeting. Victor Butcher, head of Butcher Financial Services, says a well-prepared budget serves as a road map for companies. “You need the road map to understand where you’re going with your business,” he says. With that in mind, here are a few tips to ensure you make the most accurate budget possible for 2018.

Don’t Underestimate Expenses
Whether you’re talking about internal projects, marketing initiatives, or client services, you should always assume you’ll encounter unexpected costs. If you don’t leave wiggle room in your budget, you’ll have to borrow cash allocated to other endeavors. “Every project seems to have an extra cost that was never anticipated,” notes Shufflrr CEO James Ontra. It’s much better to budget for these speed bumps than run out of gas before you reach the finish line.

Account for Fluctuations
Even if you don’t sell Christmas trees or pool toys, your business probably has a sales cycle. Assuming that your revenue and spending will be consistent throughout the year sets you up for failure. While making your budget, be sure to consider when you expect an off-season. This will allow you to focus on marketing efforts in your downtime and keep profits coming in when you need them most. Similarly, you should limit unnecessary spending during the months when you expect revenue to be down.

Make Realistic Projections
Too many companies look at the future with rose-tinted glasses. “You never want to be in a position where you’re spending more than you have coming in,” says Annie Scranton, owner of Pace Public Relations. How do you end up in this quagmire? There’s no surer way than projecting huge growth without the data to back it up. Your sales forecast needs to be realistic, if not a little lean. After all, 20 percent extra in revenue is a bonus, but 20 percent under can be a catastrophe.

Your Budget Isn’t One and Done
So, you’ve finished a budget, but that doesn’t mean it will never change. At the very least, you should review your planning on a quarterly basis. Change is the only constant in the business world, and adaptability based on profit patterns is a key component of budgeting success.