Creates structure. If you haven’t learned by now, creating or starting a business is very similar to a building structure. You have to have a foundation which is your business plan. You have to erect the pillars that will hold up the ceiling. These are your principles and processes you plan to implement in your business. And you have to have the ceiling to help keep you covered. And this is your plan around the inflows and outflows of the money in your business. Your financial goals. A budget helps keep you covered and protected from the uncertain elements of business by preventing you from spending beyond your financial means. It is THE financial tool needed to help you reach your goals. It is the guideline by which your business will be funded and operated.
Makes you aware of your numbers. Having a budget forces you to monitor your numbers regularly. It puts you in tune with all of your sales as well as your costs associated with those sales, your marketing, your payroll, inventory, fixed assets and cash flow that is needed to keep the business going. Knowing your numbers allows you to make informed managerial decisions based on solid facts, not fabricated ones.
Holds you accountable. Your budget is your accountability partner. Because you are aware of your numbers, you are more inclined to monitor and track them on a consistent basis. Having them constantly in your face to ensure goals are met.
Positions you for growth. A budget is a numerical and visual representation of your desired goals within your business. When you create your mission or your vision, you have a clear cut idea of where you want your business to go. What the budget does is help you plan out the strategy around what ideas you will implement to meet those goals and how you are going to execute those ideas. This representation displays your expected results and if monitored consistently, allows you to make course adjustments as needed to still hit your desired goal.
Saves you money. As I said earlier, having a budget forces you to monitor your numbers regularly. Because you have this financial plan in place, you are more inclined to ensure that you do not go above and beyond your expected spend. You are in a better position to see where there are costs that can be eliminated or reduced.