Importance Of Creating An Honest And Accurate Business Budget

Posted by Chuck Kocher
On June 7, 2019

honest budget for cash flow

Create An Honest Budget For Your Growing Business

Why is it so important to create an honest budget for your growing business? I’ve written before about how you can’t “just wing it” when it comes to business strategy. Your strategy needs to be a carefully considered process. The same is true with your company finances. If you can’t control your cash, you can’t control your growth.

Creating an honest budget is a big part of getting your cash under control. You have to know exactly how much is coming into your company—and how much you’re spending. That’s why having an honest budget is so critical. You can’t just “wing it!”

What Do I Mean by “Honest”?

I’m not suggesting that you or your team are deliberately dishonest when creating your company’s budget. But creating a budget requires some accountability. Sometimes people are uncomfortable being held responsible for the projections they make. Occasionally employees will “fudge” their figures so that they won’t go over budget. They figure that if they have money left over at the end of the fiscal year, it shows they were frugal. Or (as is so often the case with government or university budgets) they go on a spending spree at the end of the fiscal year—buying things they really don’t need—so that their budget won’t get cut next year. But that’s not how you grow a company. Instead of wasting money on things you don’t need, you should adjust your budget (up or down) so that it’s accurate. Spend money on things that bring growth—not on something that protects your budget.

Good Budgeting Isn’t For Lazy People

Some people simply don’t like the work involved in creating an accurate budget, so they opt for lazy thinking. If the goal is to grow the business by 10 percent, they simply add 10 percent to last year’s budget. Not only is that lazy thinking, but it’s also not accurate. A 10 percent increase in spending doesn’t guarantee a 10 percent increase in profits.

Budgeting Needs to Have Accountability and Flexibility

If your business is growing, it’s very difficult to get your budget right the first time. Things are in a state of constant change. That means your budget needs to be able to flex with your needs. But your budget also needs accountability. Someone needs to own the budget and alert the leadership team when the budget no longer matches the reality of your business. That’s why keeping a close eye on your budget during your regular meetings is so important. The idea isn’t to hold someone’s toes to the fire—it’s to make sure you have accurate financial information for making decisions.

Is your budget honest? Is it accurate? Click on the “Assess Your Cash” button below to get a quick overview of how your company’s finances are doing. You need that information in order to make smart decisions for your growing company.

honest budget for cash flow assessment



Image by pause • Pause • from Pixabay