Warning: If you’re guilty of these four budgeting mistakes, it could lead to all sorts of financial problems

Simangele Mzizi, Fsp Business, 14 Oct. 2014

Tags: budgeting mistakes, budgets, company budgets

Budgets are a great financial management tool for your business.

In fact, according to Standard Bank’s BizConnect portal, which caters for small businesses, if you do your budgets wisely, they will give you tremendous control, flexibility and foresight. But, do them badly and it could lead to all sorts of financial problems.

To avoid these problems, make sure you’re not guilty of these four common and easily avoided budgeting mistakes.

Four budgeting mistakes you must avoid

Mistake #1: Setting unrealistic expectations

According to the portal, being positive is one thing, being unrealistic is quite another. A budget that overestimates your sales or underestimates your immediate financial needs could trip you up when asking for funding and severely blur your view of the future of your business.

Remember, you’re not fooling anyone but yourself. So make sure you set realistic expectations.

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When new expenses arise, no one could have imagined they would be a source of so many serious problems for your business cash flow.

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Mistake #2: Using the wrong “tools” for the job

There’s no one-size-fits-all budgeting solution.

Some business owners prefer pen and paper, some feel comfortable with spreadsheets and others prefer finance software packages. Find what works for you and your business and stick to it.

Mistake #3: Forgetting taxes

Failure to budget for SARS’ portion of your income will get you into financial and legal hot water. Always factor in forecasted tax (and Vat if you’re registered) payments on all sources of revenue, says the site.

Mistake #4: Keeping the budget in the drawer

It’s not enough to draw up a thorough budget and put it away, you must use it.

Refer to it every month and check if you’re operating against your budgeted figures. If not, find out why and fix the problem before it gets out of control.

Financial problems could cripple your business. So make sure you’re never guilty of these budgeting mistakes.

PS: For more information on budgets, we strongly recommend you get your hands on the Master Budget Series.




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