BUDGET Is Not A Dirty Word
Posted on Dec 26 2007 | Tagged as: Finance
Ever gotten that gut wrenching fear in the pit of your belly when you thought of working out a budget? Then chances are you’ve never looked up the word in a good dictionary to find out the correct definition, and worked out how you can use that to your company’s financial advantage.
Want some really good News? Running your business on a budget does not mean reducing the quality of the things you buy or not purchasing something your business needs to operate. What it does mean, is that you have to figure out how to make enough income to be able to afford the items your business needs and to keep your spending within the limits of your income.
There’s more good news! The most valuable asset you have is your staff and yourself, and your income earning potential. If you want more money to spend, then work out how you and your employees can be more productive to bring in more money.
Another definition you need know is this: a BUDGET is the sum total of the income it takes for the company to function, and to attain its goals.
Let’s consider the first part of the definition; how much is needed for you and your company to run. Look at your Profit & Loss Statement to find out how much you spent and add the amount you are carrying on credit cards plus interest. Divide the total by 52 weeks, and multiply it by 1.036. The result is your weekly budget. That is the total of income your business has to bring in just to operate plus barely keep up with increases in the cost of doing business. That doesn’t include paying compund interest on credit card debt.
More than likely, you have financial goals you also want your company to attain; That’s the second part of the definition. Attaining those goals must get added to your budget as well.
Here is an example: a business owner wants to buy a new piece of equipment 6 months from now that costs $4,000. They divide the cost of the equipment by the 26 weeks they have before the target purchase date and learn they have to set aside $153.85 every week to have the cash for the equipment. This gets added to the budget, meaning the additional amount of income they have to put into the bank every week.
Most importantly, if you, the company owner, want to attain the goal of financial independence – working because you WANT TO instead of because you HAVE TO — then the most critical part of the budget needs to be the wealth building money you stash in an investment plan and never spend.
Figure out how much money you would need to have in savings to live without working. Divide that dollar amount by the number of weeks until the time you would like to be financially free. Figure out how to make that much more income each week, and your budget is on the correct path to gaining financial independence.
How badly do you want to be a millionaire in 20 years? Figure out a way to increase the company’s income enough to set aside $961.54 a week in savings for the next 1,040 weeks and you have made it to being a millionaire! The additional interest earnings on top of that will be a fat bonus that more than keeps up with the rise in the cost of living every year.
Today, with computers in every organization this task of budgeting is made so much easier by streamlined and automated Money Management Software, such as shown in this on-line video.. This software functions as a companion to your accounting software for really easy day-to-day operation.
Sandra Simmons, President of Money Management Solutions has years of experience helping business owners and individuals manage their income to achieve financial independence. To find out about the Money Management Software described in this article, watch the FREE 5-minute demo video on the website www.MoneyMgmtSolutions.com
- Sandra Simmons