Why budget?

The key to successful financing of daily operations is to budget.

These are some of the key benefits of a well-planned budget:

1. ANTICIPATE PROBLEMS
2. PERSUADE BACKERS
3. MEASURE RESULTS
4. IDENTIFY PROBLEMS
5. IMPROVE DECISION MAKING
6. MOTIVATE STAFF
7. SAVE TIME
8. CREATE STRATEGY

1.  ANTICIPATE PROBLEMS
The process of budgeting forces you to anticipate and prevent problems.  It demands that you estimte how much capital you are going to need for your daily operations and how you will meet these financial obligations without facing a cash flow crisis.

2.  PERSUADE BACKERS
With a budget that anticipates potential bottlenecks in your operations and delays in cash flows, you will be in a better position to make a case for a loan from your bank or investment fund.

3.  MEASURE RESULTS
A budget or plan helps you keep score:  effectively you are meeting your objectives because you have a concrete list of landmarks or targets against which you can measure results.

4.  IDENTIFY PROBLEMS
Budgets try to create the most ideal scenario for your business to follow, but they can also throw up any potential challenges or obstacles that you might otherwise have ignored in your pursuit of preferred results.

5.  IMPROVE DECISION MAKING
When you lay out a template of what the company can achieve and how much it will cost, you are in a better position to make some tricky decisions such as dropping a favourite project because the figures won't add up or to pursue a strategy that you had written off initially.

6.  MOTIVATE STAFF
A budget helps staff to understand what direction the company is going and the parameters in which it is working.  Workers can follow targets, such as sales figures or number of new customers recruited, and measure how well they are performing.

7.  SAVE TIME
While many managers feel that the research and paperwork involved in preparing a budget can cause unnecessary delays to the core operations of the business, the opposite is in fact true.  Lack of planning will inevitably lead to stalled projects while directors grapple with problems that could have been anticipated at an earlier stage.

8.  CREATE STRATEGY
You may have a clear idea of what the business needs to achieve in the short term, but you may have overlooked how the company and the sector you are working in may change in 12 months' time.  A budget can help develop a picture of the future and force you to implement relevant strategies to cope with any adverse conditions.