Today we get to talk about, continue talking about, my favorite subject – budgeting.
Hi, this is Judi Otton with GrowthCast and I’m going to continue the conversation that I started in last week’s video. But if you want to get this whole playlist on budgeting, subscribe here . Last week we talked about why you need a budget, today I’m going to go over some general considerations, and then next week we’re going to dive right into the nitty gritty how-to stuff. But first, let’s talk about some things that you want to think about before you start.
First of all, there are two distinct ways to do budgeting. Zero-based budgeting, which means you start from scratch with everything zero and you add dollars for each category, and budgeting based on the prior year. If you have an ongoing business and you’re only changing, you’re only making some tweaks, definitely base it off the prior year. But if there’s something crazy going on in your business or if you’re brand new, you’re definitely going to have to do zero-based budgeting and that’s okay because sometimes that winds up with a better result.
The second thing I want you to think about is who on your team, you’re going to include in this process. It’s a great idea to include your team, get input and get buy-in. They’ll think of things that you haven’t thought of and as you’re developing this, they’ll take some ownership of the budget as well, ideally of course.
The third thing I want you to think about is what’s going to change next year. What things do you expect to increase – fuel, health care, what new initiatives might you be launching? What sort of trends are going on in your industry? What’s going to change this coming year versus the current year?
The next thing that I want you to think about is wages. I have a template that you can get here where wages are separate because you can put in raises, you can put in promotions, and you can put in new team members at different times of the year.
I also want you to think about what capital expenditures, and what big purchases you might have coming up in the next few years and start budgeting for those.
And finally, as you start working through your budget, it’s going to be easiest to track budget versus actuals, if you’re mirroring your chart of accounts, meaning your budget looks just like your profit and loss statement. So those are some general considerations.
As I said, next week, we’re going to dive right into the ‘how to’ so stay tuned next week for your latest Fiscal Fitness Tip of the Week.