Budgeting Realities

I’m not sure I’ve ever met anyone who truly enjoyed the budgeting process. I think there are some ways to make the process less difficult and more realistic. Below are some things that I believe are usually budgeting realities that hinder performance by distorting expectations.

What Shapes the Future

  1. “Change your thoughts and you change your world.” – Norman Vincent Peale
  2. “We cannot direct the wind, but we can adjust the sails.” – B.N. Woodson
  3. “You may have made some mistakes and you may not be where you want to be, but that’s got nothing to do with your future.” – Zig Ziglar

So, why did I start with these four quotes? Well, frankly, taken together they summarize what I believe is possibly the biggest pitfall to budgeting.

We Can’t Do Any Better

Quotes number 1 and 2 are critical. How often have you heard excuses (often disguised as good reasons) such as “We struggled to get the sales we did last year and the market looks even tougher this year”, or “We’re barely keeping our heads above water now, so how do you expect us to get by with less?” There are many along the same line, but the support for this is rooted in thinking. If you go into the budget process with the presupposition that the status quo is the best there can be, you start out defeated. It is critical to question your thinking and test it to see if it really holds true. Maybe there’s another way to sell more. Maybe there is another way to do things that makes it possible to accomplish your goals with fewer resources. But, unless you are willing to honestly question your assumptions you will miss opportunities. You must change your thinking to adjust your business sails. Chart a totally new course if necessary.

Stuck in the Past

It is common when developing a budget to use the prior year’s budget or actual results or a combination of the two as a base to build the current budget. At first that may seem like a very logical idea. But is it? To complicate matters some people fear change because something did not work out in the past. Their position is, “We tried other things before that didn’t work and just look where we are now.” It is one of the budgeting realities that past failure tends to make people afraid to again try something new. They’d rather stay where they are?

Look again at the third quote quotes above and let’s see how it relates to faulty thinking in the budgeting process. I realize that some people buy into the idea that history repeats itself, but does it have to? The answer is no.

So things you previously tried didn’t work out, and you don’t like where your company or department or even you are at present. So what? Unless you are willing to take risks where you are now is where you will be next year and the year after and the year after that and on and on. When it comes to creating a budget, one of the budgeting realities that must be faced is that business owners and their employees hold the key to the future, and unless they are willing to change then there will be no forward movement.

What about you and your company? Is creating a budget just an exercise in futility and a mere formality? It doesn’t have to be. Get out of the past and be willing to change.

If you want to know more, contact AimCFO – Contact

As always, your comments are welcomed.

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