The Big Business Budgeting Conundrum

Business budgeting is important, right?  Business owners must plan their financial strategies – that’s what I’ve been taught!  But is this true?  This may shock you, but – not always!  Whether you believe it or not, business budgeting must be limited and kept in-check.  Otherwise, your business-growth action-items may fall to the wayside.  And the lack of growth which ensues will hurt your business.

Don’t let your important business-growth action-items fall to the wayside because of business budgeting!

Now it’s time to reveal a different angle regarding business budgeting – one that has been written about already, but isn’t in the main-stream.  So this will require some attention!

First, what is business budgeting?

As most of us already know, business budgeting manages income and expense forecasting.  But also:

• Business budgeting will enable you to compare financial goals to actuality
• It will reveal how your business is performing
• Business budgeting will enable you to plan ahead financially
• And it’ll help determine monetary changes to consider
• It’ll regulate the life-blood your business – MONEY

Business budgeting regulates the life-blood of a company

Money is the life-blood of all businesses, regardless of the industry.

Business budgeting – the good and the dicey

In most cases, the regulation imposed by business budgeting effects every aspect of a company.  A business budgeting system will allocate funds for expenses.  For example, periodic expenses, like bills, can simply be listed and entered in.  And it’s not difficult to predict periodic expenses.  They include:

• Utility bills
• Supplies
• Facility maintenance
• Payroll
• Security
• Insurance

Budgeting your periodic expenses is necessary, right?

Yes, this a good thing!

Then there are random small to medium expenses and monolithic expenses – large, one-time expenses that can hurt the bank.

Examples of random expenses include:

• Repairs
• Travel
• Upgrades
• Innovation endeavors
• Purchases
• Investments – training

Monolithic expenses may include:

• A large innovation endeavor
• An expensive strategic advertisement
• The purchase of another business
• Replacement after a theft
• A major repair

A good business budgeting system should forecast these expenses as well, right?

Hold that thought!

What about income?  You have, or expect to have some dependable, steady income sources, right?  This sustained income may come from:

• Subscriptions
• Refills
• Repeat scheduled services
• Product replacements

Those income streams may be placed into any business budgeting system.  So you should budget these, right?

Yes, this is also a good thing!

How about new, expanded income opportunities – finding ways to grow your business?

Some examples include:

• Gaining market share
• Entering new markets
• Challenging the status quo

You must budget for path-finding, right?

Hold that thought too!

Always plan, strategically, for ways to grow your business.  Income growth.  Business growth.  This is the most exciting part of business, in my opinion, and it is what most businesses strive for.  But, can you really forecast the cost of it in a business budgeting system?

Time for some answers!

There is a dicey side to business budgeting, and as you probably guessed, it is regarding the following:

• Random expenses
• Monolithic expenses
• New, expanded income opportunities

Please remember, this idea isn’t main-stream.  My intention is to inform and provide food for thought.  Understanding the dicey side of budgeting will allow you to properly balance how you manage finances when growing your business.

Dicey is uncertain and unpredictable.  You should only apply an appropriate level of business budgeting for these three categories – keep it limited and keep it in-check.  There are some things you should not limit, or regulate, within reason.  If business growth is important to you…

Allow for calculated risk-taking!

Then allow for innovation!

You can’t always budget for these.  And if you try too hard, your business-growth action-items might fall to the wayside!  So business budgeting for these unknowns will take a great deal of time, energy, and other resources.

Spend your non-monetary and monetary resources wisely on budgeting.  And remember, if you over-allocate for budgeting, the lack of growth which ensues will really hurt your business.  Then, be sure to provide some financial freedom, within reason, for uncharted growth opportunities.

Calculated risk-taking and innovation allow expansion into uncharted growth opportunities!

Now let’s enter the deep end – the darker side of business budgeting.  There can be some serious implications to business budgeting!  So let’s take a serious look at this…

Business budgeting – the darker side

There’s a very interesting article at Harvard Business Review which covers a great detail about this.  It’s called Corporate Budgeting Is Broken — Let’s Fix It.  Here’s a key quote from the article:

“Corporate budgeting is a joke, and everyone knows it. Forcing them into endless rounds of dull meetings and tense negotiations, it consumes a huge amount of executives’ time. Also, it encourages managers to lie and cheat, lowballing targets and inflating results, and it penalizes them for telling the truth. Next, it turns business decisions into elaborate exercises in gaming. Then, it sets colleague against colleague, creating distrust and ill will. And it distorts incentives, motivating people to act in ways that run counter to the best interests of their companies.”

Business budgeting encourages:

• Business executives to lie about financial targets to ensure success
• Penalization of business leaders for being honest when targets are not met
• Elaborate game-play…managers manipulate processes to meet financial goals
• Distrust and ill-will among managers as they shoot for financial targets
• Incentives distortion by rewarding managers based on budgetary accomplishments

Many of these are considered fraud, and the rest are simply unfair and wrong.  Unfortunately, in today’s culture, the public requires instant gratification, so if your growth-plans require more than three months, expect to be penalized after posting your quarterly financial results.  This applies to corporations, of course.  Now there’s a good motivation to remain privately owned, right?

Conclusion

To avoid stunting the growth of your business and to avoid corruption, please keep your business budgeting in-check.  Limit it, so you’ll have the freedom to take calculated risks and innovate – see Branding Experiment – Profound Innovation to discover what it really means to innovate.

Thank you for reading:
Business Budgeting Conundrum!

Written By: Greg Hixon of RE-MEX-IMAGE and Hixonic Web Specialists

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