Not everyone likes budgeting. Even the people who do like budgeting don’t like budgeting mistakes. Budgeting mistakes are the ones that often bite the hardest because you may not catch them until late in the game, so best to be on the lookout for them now. Here are five budgeting mistakes to watch out for.
- Leaving out the revenue forecast: It’s not just about how much you spend—if you don’t have the money to spend, it doesn’t matter if you budgeted for it. Revenue forecasts are the starting point to making sure you aren’t budgeting too much.
- One budget owner: Yes, your financial person is the one who keeps the budget, but he or she is not the one doing the majority of the jobs the budget is spent on. If you want purposeful, effective budgeting, make your team leaders budget owners. They know what line items are unnecessary and which ones are crucial.
- Disorganization: Make sure you are accounting for every dollar and where it should be spent and where it actually was spent. Don’t leave gaps—it sounds simple, but it’s one that often catches smaller departments as they grow big.
- Illogical budgets: Your budget should show you how your investments in time and money will lead to growth. What money do you expect to make, and what money do you need to spend to make it?
- Include time: Yes, money is what a budget is tracking, but knowing how much time you have available and how much time you spend is a very good factor in knowing whether you’re on budget—ahead or behind.
People think of budgeting as a restriction, but when done well, it will let your company make more money, which hopefully lets you do more things that increase your budgets!