The key to following a budget is not so much about discipline, but about creating one you can follow in the first place. These 5 budgeting tips used by Interim CFO’s will tell you how to do that.
Every good business has a budget, but not all can stick to it. The trick to staying on track is having a realistic budget that has the flexibility to account for unforeseen changes. When you plan within a budget, everything works out. With these easy budgeting tips followed by Interim CFO’s, you’ll have a budget which will give you the answers to common management decisions.
Interim CFO tip #1: Start with a zero-dollar budget
Create a zero-dollar budget to use as a base upon which you can build. That is when after you pay your bills, you have $0 left which means your company can function. Ideally, you’re looking for profit, so you will have to plan for it.
You have to decide where the profit will come from and where it’ll go. It needs to be explainable through growth, more business, more capital or expenses. If you have a zero-sum budget, you can plug in a model that saves or accrues for future expenses. Create a cash flow model budget with truly anticipated cash flow revenue on a month-to-month basis.
Interim CFO tip #2: Use a live budget
Plan a budget for 13 weeks – just over 3 months. That’s a good point to reflect on your budget and tweak it. That way you can see where you end up and make changes for the next period. A good model will have actual and projected models side by side.
Interim CFO tip #3: Design around your worst month
A key suggestion is to design your budget around your worst month. Use figures from your worst performance, even if your company has a seasonal sales cycle. Budgeting in such a way is better for the long-term because it will cushion in the good months to offset profit.
Interim CFO tip #4: Set realistic goals
Setting realistic goals will stop you from setting unrealistic expense expectations. It will also put you in a position to be able to react to a bad situation.