Most business owners dread doing budgeting. Here is why it doesn’t have to be a headache.
Earlier today, I finished up a budget review with one of our customers.
The meeting took 30 minutes and we covered several key decisions he was making in his business. Hiring, cash management, and revenue outlook were all resolved in that short amount of time with a couple actions items for follow up.
Budgeting offers tremendous benefits such as more informed decisions, awareness of expenditures, and accountability to managers.
Unfortunately, even businesses with > $1,000,000 annual revenue rarely have a budget set up that they follow. In many ways, they are flying blind.
I’ve noticed if these simple steps are followed each month, your budgeting will become super easy, routine, and make your time budgeting effecient
1) Start with the end in mind. In your first budgeting meeting, make a list of all the questions you want answered from your budget. Every month, the same questions should be answered in your budgeting meeting. Write down these questions and answer them each month.
2) Create an agenda. Create and follow an agenda each month. Don’t deviate from the agenda in your meeting no matter how much someone attempts. Don’t let them throw you off. Table the discussions that aren’t relevant.
3) Create action items. Identify the action items needed to be taken after the meeting and assign responsibility and a follow up date.
What is data integration?
In most SaaS businesses, I’ve noticed I can look at a revenue number in Stripe/ChartMogul/SaaSmetrics and the accounting system and find sometimes large differences. Today with our customer, we resolved a 10k revenue difference in just a few minutes by review our different systems and pinpointing the cause.
Make sure your systems integrate together, or if not, that little “checks” are put in place to make sure numbers tie out. If the revenue number on your budget doesn’t match what your other systems say, chances are you are making decisions on flawed data. We dodged a bullet today because we had a check in place to identify the differences.
The questions checklist makes it super easy to see how your actual performance compares to budget. Let’s be honest, some budgets get gigantic and who wants to sort through all the details?
To make things simple, structure all your questions so that a favorable response is a “yes” and an unfavorable response is a “no”. If you structure your questions like this, then it is easy when someone reviews the sheet to identify budget variances. Here is a sample question checklist below:
|Lucid Books Financial Meeting|
|Is actual revenue achieving budget?||N||Y|
|Does ending cash meet budget?||Y||N|
|Are G&A costs on budget?||Y||Y|
|Are Project Development costs on budget?||Y||N|
|Are Marketing costs on budget?||Y||Y|
|Are Customer Support costs on budget?||Y||Y|
|Are IT costs on budget?||N||Y|
|Are contract services on budget?||Y||Y|
|Are Facilities/Travel on budget?||Y||Y|