It’s always a good idea to review your business performance over the past year. But don’t wait until December to get started. I recommend that business owners and managers analyze their budget against actual figures every quarter. You’ve heard the saying, ‘The older we get, the faster time flies.’ The same is true of businesses as they mature. The amount of time you’ve been in business often correlates with the complexity of your operations and the number of strategic decisions to make. Waiting until year end to reflect and recalibrate where necessary may be too late. The time for budgeting is now.
This quarterly review shouldn’t replace the monthly financial assessments you should be doing. Rather, after your numbers are finalized for the month, and then the quarter, take some time to see how those results are matching up with your expectations for the year:
- Are you on track to achieve your sales goals?
- Have you been able to pay down your anticipated amount of debt?
- Have you reduced your overhead/fixed costs as planned?
It’s difficult to pick up trends with one month’s activity. For most of us, quarterly reviews are more indicative of trends we should be monitoring.
If you’ve started the new year without preparing a budget, carve out some time to create a fiscal plan. Without it, you can’t really be doing any kind of true assessment, quarterly or otherwise. As the great motivator Zig Ziglar once paraphrased, “You can’t hit a target you cannot see, and you can’t see a target you do not have.”
Budgets need not be hairy monsters or make the “Non-Numbers” folks among us anxious. Think of budgeting as the directional guidance on your business’ dashboard. Following your budget is enormously helpful, but even the most effective tool needs to recalibrate from time to time.
Virginia McGann is the founder and CEO of Value Management Resources in Chicago, IL. She specializes in coaching start-up firms into growth; struggling firms to stronger footing; and high performance organizations to ever greater results. You can reach her at firstname.lastname@example.org.