Business that has no budget planned is only catapulting itself to hosts of financial problems in the future. This is true regardless of the size and age of a business. Conversely enough, businesses that have short and long term objectives are likely to succeed. It is for the reason that they have detailed business plan and has a guideline for seeing new opportunities and reaching financial success.
What Benefits Budgeting Brings?
Budgeting for a business comes with expenditures and debt obligations. In here, it is accountable for a number of things such as:
- Mortgage or rent
- Utilities
- Lines of credit
- Loans
- Professional services
- Vendor accounts
- Payroll
- Insurance
- Advertising
- Purchasing obligations
- IT services
Of course, there are several more that has to be accounted for but the abovementioned are oftentimes the most important.
Just try imagining the probable cause in the event that a business fails to meet even just one of its financial obligations – all because they have poor budget planning. Not being able to meet the payroll creates a negative impression among employees. This could even give them reason to leave the company. Not having insurance makes the company vulnerable to liability and failing to pay rent could result to an imminent eviction. As you see, it is a ripple effect. All of it was because one hasn’t been met due to poor budgeting.
Consequences of Poor Planning
Business that does not know where the money comes or goes hampers its ability to make the most of available investment opportunities, expand or make long-term commitments among its clients or suppliers. Moreover, it can potentially lose its existing business if ever unforeseeable events happen such as delayed shipment of goods, power being turned off and the likes.
Failing to have a financial record organized may mean the denial of purchase of equipment, operating loans, ability to make bids on government contracts and so on.
So why do Budgeting?
With carefully planned business budget, it lets them to monitor where the money goes. This enables long-term and strategic planning for everything. Besides, being able to know where the budget is at allows business to invest in new product line, set profit goals and hire new staffs.
Of course, there are other benefits included as well such as the potential to attract new investors, chance of opening new line of credit, easier tax preparation, have better decisions about benefits, bonuses, salaries, overhead operating expenses and the likes. It doesn’t matter where you get your funds from be it from your lawsuit loans, savings and whatnot; having a budget is a must!