5 Budgeting Mistakes That Could Be Costing Your Business Money

With the new year on the horizon, it’s a great time to start thinking about your next year’s budget. Depending on how your business’s fiscal year runs, you may already be in the preparation or planning process for the New Year. Keep these costly budget mistakes in mind as you work through your planning sessions.

1.) Failure to have a written budget – without a written budget or with no budget at all you’re setting your business up for failure. Your business loses money when there’s no budget in which to use as a guide in running your organization. Failure to have a budget runs the risk of high costs and overspending. Also, without documentation, it’s hard to remember what your assumptions and thoughts were when you first put the budget together.

2.) Costs are budgeted too low – entrepreneurs tend to underestimate the business costs in their budgets. This is usually due to not properly tracking expenses on a regular basis. When you don’t track the costs in your business, you’re not aware of trends that are occurring in your business. Additionally, entrepreneurs often times are a little too conservative, instead of expecting the unexpected and adding a little percentage increase to each cost item.

3.) Not managing cash flow – every business has a cash flow, a certain trend in which money flows in and money flows out, an infusion of major cash, or months when there’s very little cash in operations. If you aren’t monitoring the cash flow, you’re not aware of when to expect cash based on the types of products and services you provide or based on how you are paid throughout the year. When the cash flow is not taken into consideration in the budgeting process, you’re apt to overestimate the amount of cash you will receive in a given year.

4.) Ignoring the unexpected - one very common budgeting mistake of many entrepreneurs is not thinking of what can possibly not go as planned causing a dip in revenue or a surge in costs. It’s great to be optimistic in your budget, but you should also factor in those unexpected costs, or a surge of new clients and sales that may also incur more costs and revenue as a result of growth. There’s also a high tendency to underestimate or not factor in taxes which could set you up for a high tax bill that you didn’t anticipate.

5.) Failure to include as a part of your yearly planning process – every new project, every goal, and every objective in your business has a money implication. Failure to make budgeting a part of your yearly planning or goals strategy sessions, is a sure way for losing money in your business.

Avoiding these common budget mistakes will help you to keep more of the money you make in business and will also aid in running your business more efficiently!