The Dog Ate It (And Six Other Excuses for Not Having a Budget)
Year-end always brings a significant list of financial tasks to complete. We start thinking about closing the books, organizing taxes, selling investments, enrolling employees in benefits and establishing budgets.
If you list is pretty long or one item in particular seems daunting, it might be that you procrastinate, which is unpleasant. One of the most daunting tasks business owners face in the tasks they have to do is establishing their budgets. In fact, so many are determined to put it off that they’ve done just about everything to avoid it.
Here are some of the excuses I’ve heard, and why they just don’t hold water.
Excuse 1: Budgets are too confining; I can’t stick with my initial estimates for 12 months. It doesn’t make sense to create a budget and then disregard it, but here’s news: your budget is yours. You don’t file it with the IRS, you’re not legally bound by its contents and you (hopefully) didn’t make a pinky-swear promise to adhere to it with unwavering exactness. By some estimates, almost 80% of companies that create budgets don’t change them even once during the fiscal year. That’s not how things work in real life. You can and should change your budget as circumstances require. Budgeting for a shorter timeframe, such as quarterly, might even be a viable option for you.
Excuse 2: I won’t be able to react as flexibly to an unforeseen crisis if I have a budget in place. The reality is that companies that create budgets tend to be more flexible and more proactive than companies without budgets. When you’re actively tracking your progress toward a specific goal you can tell much earlier on if you’ve hit a snag. You can react while the situation is smaller and more manageable, and sometimes you can even see a problem before it occurs.
Excuse 3: The budgeting process is too complicated and time consuming. Well, this is actually true for too many companies, but it doesn’t have to be. Many companies spend months agonizing over their budgets and devote upwards of 20% of management’s time to their creation. Although a certain level of detail is needed if the process is going to be effective, budgets can be fairly simple. And the time you invest in planning upfront is never wasted; it’s time you save down the road reacting on the fly to decisions that need to be made anyway.
Excuse 4: Things change too quickly in my industry for me to commit to a budget. Sorry. Conditions change at break-neck speed in every industry, and it’s not a valid reason to excuse yourself from planning for the future. A budget doesn’t ask you to predict unknown events (i.e., Will gas prices go up? Will I have turnover in staff? Will new legislation be passed that impacts my business?). A budget requires you to look at the big picture and commit to the goals you want to achieve and the actions you plan to take – things that are largely under your control. If you’re unable to look critically at your business and determine what it is you want to accomplish in the next 12 months, you need to ask yourself why that is.
Excuse 5: Budgets are meaningless. Everyone just fudges the numbers to paint a pretty picture of how things ought to look. Creating a budget that is based on too-lofty goals, hoping it will provide the inspiration to achieve them, is a sure-fire way to set yourself up for failure and frustration. One internet post compared budgets to pornography: “a fantasy about how the author would like the world to look, having no relation to the realities of the world, designed to titillate, stimulate and motivate the reader, but ultimately resulting in a sense of alienation and despair.” Long-term, that’s of no use. When it comes to budgets, you can and should keep it real.
Excuse 6: I have a budget that I keep in my head instead of on paper. Of course, it’s good if you can keep a running total of a few figures in your head for quick access if you need them. However, it’s not realistic to be able to do this for every expense, number and project. You might be able to do it for a while until your business reaches a certain size, but eventually it will be too much to keep all the details straight just in your head. In addition, if you have people working for you, you’re keeping them from taking some responsibility and accountability for your business’ success or failure along with you. Even if you think you’re of a small enough size that you don’t need a budget right now, you will someday. Start good habits now and begin to keep one while your business is small so that it will be second nature when your business grows.
Remember, budgeting is simply planning. It forces you to step out of the day-to-day details and look strategically at your business, to take stock of where you are and to set a goal for where you want to be. And let’s face it, without a formal tool in place that nudges you to action, that kind of planning is likely to take a back seat to all the other daily crises that demand your attention.
What will it be, then? Did your budget get put down your garbage disposal by accident? Do you need to paint your nails so that you won’t have time? Did your uncle come in from San Diego to visit? Or are you ready to quit making excuses and get to work on those numbers?