Budgeting

Prepared by Mary Ann Miller,

President & CEO of the Tempe Chamber of Commerce

I just finished putting together the Chamber’s budget.  It’s a painstaking process:  estimating revenues and expenses month by month, line item by line item.  Looking into a crystal ball and guessing how much other businesses will increase their charges for catering, insurance and postage.  Putting it all into a spreadsheet and hoping that the first draft’s bottom line is positive.

But I remember the first time I did the budget – it was just slightly terrifying.  I had no basis for historical information, no real feel for the unexpected and a great fear of making a mistake.  Now, years later, while still not easy, it’s a much more accurate document that reflects our business plan and influences decision making throughout the year.

Budgeting is not necessarily an innate talent of the small business owner and manager, but it’s an integral part of their jobs.  Here are a few hints that have helped me through the years:

Good processes result in good historical data. The first time I budgeted our general ledger listed every bit of revenue and expenditures.  Unfortunately, it was coded to a nine-digit number that required going back to individual checks and receipts to make heads or tails of it.  A good system like QuickBooks and consistency in categorizing will take hours from your task and give you the confidence to project into the future.

You’re not the only one looking for numbers. If you have a new business or a new program, there is no historical data.  That’s when a phone call to your peers can help.  They may have just purchased that new piece of equipment or offered that new benefit, and many would be happy to share the information.  

Close your eyes and walk through it. Visualization helps with budgeting, too.  What are the components involved in your plans?  What do you need?  What would you like to have?

Chances are good that costs will increase. I’d rather be pleasantly surprised than disappointed.  Always plan for an inflationary increase unless you have a contract that says otherwise.

If you ask for a ballpark figure, don’t get mad if it’s wrong. When you’re trying to estimate in your health insurance costs, ask your broker for an average increase but realize that there are many moving parts affecting the actual amount.  They’ll be more likely to give you an educated estimate if they know you’re not going to come back and try to hold them to it.

Devote uninterrupted time to it.  Even after all this time, I find it difficult to concentrate on budgeting if I have distractions.  I prefer to gather all my information and set aside two days to work from home.

Check and double-check.  Simple mistakes can cause big problems later on.  Check your entries, check your math and check your spreadsheet formulas.

Always remember that your budget is a guide.  Things can change and unanticipated opportunities can arise.  A budget will help you figure out how best to adapt to new situations, but it should not be the sole factor in your future decision making.