"Year-end budget" – just hearing those words often triggers groans and a flood of negativity among entrepreneurs and business owners. The idea of diving deep into your financials and divvying up funds doesn't usually make it to the top of anyone's "fun things to do" list. Many are tempted to procrastinate until the very last minute. But, let's be clear, that's a big mistake.
Delaying your budget until December can mess up your business roadmap big time. It can throw a wrench into your forecasting, make fundraising a headache, and even lead you to miss crucial deadlines. Not a good look.
As a business owner or CEO, you juggle a million things, and finding balance is like trying to surf a tsunami. But in this case, procrastination could sink your financial ship, especially with all the uncertainty swirling around as we head into 2024.
Navigating Economic Uncertainty: Budgeting in a Nutshell
Cash is the name of the game once again. Making sure you generate enough cash during budgeting is priority number one. You need regular updates from your accounting team on how much cash you've got. If cash is in short supply, you need to know when the piggy bank might run dry so you can make smart cutbacks.
When we say everything is on the table, we mean everything. That includes operating costs, staff numbers, R&D, and capital expenses. It's all fair game when you're prepping for an economic downturn.
You can also get creative – try improving how you handle incoming and outgoing cash, reduce excess inventory, or trim the fat from your expenses. Just make sure you do it thoughtfully and logically, not in a panic.
Out with the Old Budgets
Remember, 2024 is not 2023, and it's definitely not 2020. Every year brings its own unique flavor, and trying to predict the future by looking at the past is like trying to read tea leaves in a coffee cup. It's just not happening.
Plan for the Worst
As a business owner or leader, you need to be prepared for anything. That means thinking about mild, moderate, and worst-case scenarios. Create plans for each one. It's like having a fire drill for your business – you'll be glad you did it if you ever need it.
Find out what kind of cuts you'd need to make to stay afloat in the worst-case scenario. Does it mean fewer business trips or downsizing your team? Starting from the worst-case scenario ensures you're ready for anything.
Now, let's get to the good stuff – here are four reasons why you need to start your year-end budgeting now:
1. It Takes Time
Budgets aren't something you throw together on a lunch break. According to the Small Business Administration, a budget covers labor and material costs, startup expenses, operating costs, revenue targets, and profit projections. You want to start this process in Q3, preferably shortly after Labor Day.
That gives you a solid 3-4 months to gather info, set your goals, crunch numbers, project outcomes, get feedback, and finalize your plan. These things take time.
2. Gather Input
If you're running a business with multiple departments or answer to a board, you need more than just your financial insights. You've got to get input from all corners for accurate forecasting and a complete budget.
Understanding the sales game plan, operational strategies, staffing needs, and expected capital expenses will help you make a budget that actually works.
3. Deadlines Matter
Many businesses, especially startups, need to submit their budgets to their banks a month before year-end. That means your plan needs to be signed, sealed, and delivered by December 1. Plus, you've got specific deadlines for board review and approval. Missing these deadlines is a no-no if you want your business to thrive.
4. Budgeting May Require Multiple Drafts
Crafting a flawless budget on your first try? Don't hold your breath. It's a process that needs attention and patience. Your first go is like a "wish list" based on the info and projections you have. The refinement phase involves updating projections, cutting redundancies, and moving resources around. Be ready for multiple rounds of review and revision – it's all part of the game.
So, don't rush through your budget development. It's tempting, but it could lead to some serious financial issues down the road. This task needs your utmost care.
If you haven't started yet, it's time to get your budget game on. Start now, and you'll have a comprehensive plan that'll keep your ship steady through 2024 and beyond. And hey, if all this budget stuff is making your head spin, consider calling in the experts. Talk to AmpliFi for a friendly chat about your business.