Do you hate budgets?

Whenever my accountant ask me to put together a budget for my business, my response was - “When I get the time I will!” However, I never seem to have the time.

For years I never paid attention to a budget. I knew if I made money by looking at my financial statements and that was good enough for me. Also, every time I tried to put something together I never compared my actual financials to the budget numbers I created.

Not long ago, I decided to take a different approach. I developed a forecast for a quarter of what I expected income and expenses to be. I came up with the figures based on the previous year’s actual numbers. It was easy to look at last year and just add a percentage increase to the numbers. Then I took the time to review once a month the forecast with where we were at that point.

By using this system of creating a forecast and comparing that to actual financials on a monthly basis I was able to focus on income areas that were falling behind and stop expenses that I didn’t need to make.

I am big fan of technology products. It is not uncommon to spend thousands of dollars every month on the latest gadgets. With the forecast in place I caught myself spending more then I allocated and was able to just cut back the next month. The thing about this system is its flexibility. You are not locked into a specific figure each month but yet you stay within guidelines of where you want to be before the year or quarter finishes.

The easiest way to set this up is to use a book keeping or accounting program like Quickbooks or Peachtree. Track all income and expenses using the software. Then print financial statements that track what you have done. Next, take the numbers of your financial statements and increase your income by the percentage you want to raise revenue by. Finally, look at expenses and determine what categories will increase based on the sales increase. This will become your financial projections.

The last step is to review your actual financial statement (Income Statement or Profit and Loss) to your projections. Have systems in place to increase revenue and decrease expenses as necessary.