It concerns me a great deal that the majority of SME’s that I meet have never used a budget for their business. A simple revenue target is not a budget and neither is “last year’s expenses plus 10%”. There are a few excuses that I’m often given that on the face of it seem valid, but when you think about it a bit longer they are dangerous assumptions. Here are a few of the common excuses, make up your own mind and tell me what you think:

1) It’s impossible to predict the future, I need concentrate on living in the present day;

2) Everything in my industry is changing rapidly, I need to wait to see what happens;

3) I’m not an accountant I’m a business person, so I don’t need to know about that kind of stuff;

4) I did one in the past and it turned out to be way off, what a waste of time that was; and

5) I am comfortable with how things are going, nothing needs to change, let me get back to work.

Let me know what your experiences are with SME’s using budgets to drive their profit and cashflow.

I personally use an annual fixed budget which is broken down monthly with income, expenses, cashflow and KPI targets. I then compare my monthly actual results against the budget and update a rolling 12 month forecast each month. I have more clarity in my day-to-day activities because I can concentrate on important tasks that help me achieve my targets. Without targets my activities would still fill a 40 hour week, but they’d be hit and miss in terms of relevance to where I want to take my business.