Step 5: Monitor and Adjust

Let's review: we analyzed our sales for the past 18 months and have created an attainable sales target. We analyzed our costs and ruthlessly cut out anything that consumes our profit. Finally, we put profit into our calculations and put the budget for the expenses carefully and logically into the appropriate months. No straight-lining of expenses to make it "easy".

Now it is time to enter the budget into your accounting software.? Give it to the bookkeeper and tell him/her that you want to see a monthly report that shows every line of the budget against what was spent.? This is generally called the Budget versus Actual Report.? Dedicate 45 minutes each month to review each line and answer the following 2 questions: “WHAT HAPPENED and DID IT YIELD MORE or LESS PROFIT?”.? You may have to make belt-tightening adjustments to stay on track.? If we spent more than planned on one thing, where can we cut back next month to make up for it?? In my experience business owners take 5 minutes to look at the report, note that they spent more than they had planned, shrug and say “oh well, better luck next month” and go on to the next priority.? Money has gone down the drain and nothing was gained or learned.? In my experience as an accountant and fractional CFO, THIS step is where business owners fail the most.

If every dollar earned by a business was compared to a well-designed and monitored budget, I am confident that less businesses would go under.

?Most business owners focus only on the next sale or launch.? They spend less than an hour a month looking at their numbers.? In my experience, there is a direct relationship between how much time a business owner spends with his numbers and the number of digits they have of profit.

?I may sound a little nutty here, but I feel that the act of creating a budget for your business is an act of love and care for this precious gift which is owning a business.? Take care of your business’ money, and the business will take care of you, your loved ones, your employees, your customers and community.

If you feel this has been useful or have any questions, please DM me. I would love to talk - spreadsheets are my jam!