Posts Tagged ‘assumptions’

Outside the Box Thinker

You’ve undoubtedly heard a statement like, “She’s a real outside the box thinker”, right? The truth is everyone is in a box when it comes to their thinking. The question becomes one of how did that box get created and Read the rest of this entry »

Share

Be Cautious in Your Assumptions

Assumptions make it more efficient to operate but also can harm results, so it pays to be cautious in your assumptions. Read the rest of this entry »

Share

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.

Share

3 Business Startup Essentials

If you’ve ever started a business or been involved in a business startup, you know the excitement it can produce. That excitement is a good thing as it helps energize those involved and promotes enthusiasm that is critical to the early life of a business. On the other hand, that same excitement can cloud peoples’ thinking and cause critical mistakes. In order to remove that risk and still keep the positives, there are some steps or business startup essentials that will help immensely.

Recognize a Reality

As much as we may like to think we do, we really have quite limited ability to visualize how our Read the rest of this entry »

Share

Justify Spending

Does your company have a way to justify spending? If so, have you realized that there may not be one all-encompassing way? If not, the why spend?

A Little Background

One of the first times I encountered this after college involved justifying expenditures for capital equipment. Actually I don’t even remember what method was used. It could have been return on investment (ROI), time to recover the cost through expense reduction, discounted cash flow or some other method. The point is, though, they did at least have some method in place to justify capital expenditures.

Years later a client would not even entertain the idea of justifying equipment purchases. The only method this particular client used was somebody said they needed it or Read the rest of this entry »

Share

The Liquidity Trap

Sometimes financial calculations are not what they at first seem. That is, we may not be able to take them at face value. I previously discussed a little about what financial analysis can do for you in Things Financial Analysis Can Tell You. In that post two things mentioned were the current ratio and the quick ratio. Let’s look at these a little closer. To do this we’ll use Read the rest of this entry »

Share

Are You Really Listening?

I suspect most of us think we are good listeners, but are we really listening to what others are saying. There are several things that are critical to being a good listener. In a prior blog (see Are You Listening) some issues associated with listening were discussed. Let’s expand on these

Assumptions

Everyone makes assumptions. To some extent this can be helpful, but when it comes to listening this can be a handicap. Consider these assumptions that we Read the rest of this entry »

Share

Enter your email address:

Delivered by FeedBurner