Believe it or not, now is the time to begin preparing your budget for the next fiscal year. Why now, you ask? Why not at the end of December?
There are several reasons why today is the right time to address the budget, so let’s explore the “why” of this important task. In a future article, I’ll discuss how you might consider getting it done most effectively.
Here’s why you need to do this now:
A. Now, you have time.
Think back to December 2015. With year-end business reporting, family holiday events, and a general sense of celebration to enliven and distract during December, you actually have time in November and December to review, analyze and study changes, enhancements and additions/deletions that can make the budget stronger, adaptive and relevant for your next fiscal year.
B. Now, you probably recently experienced the effect of budget adds.
Perhaps something happened this year that required you to spend capital that was not forecast or planned, such as equipment breakdowns, facility repairs, new information technology equipment needs or even the opportunity to take advantage of a new piece of equipment that was unavailable last year. Maybe you were lucky enough to have some money placed in another budgetary category that allowed you to transfer funds and pay for the unforeseen expense. More than likely, however, you did not have that cushion and either had to take out a loan or draw from your line of credit. Neither is a bad thing, unless you did not plan for them. So now is the time to add that cushion to next year’s budget.
C. Now, you’ve discovered line items you probably no longer need.
Now is the time to recognize and plan for budget deletions. If you have not reviewed your budget in several months (or years), you may find that you allocated money to budget categories that are no longer appropriate or applicable. That magazine subscription that now comes digitally at a lower price; fleet repairs to older vehicles that you replaced with new ones last year, each with a 4-year bumper-to-bumper warranty; or perhaps you allocated money for professional association dues but you’re really not participating any longer.
Adding or deleting budget categories is best accomplished through good, advance timing, in as relaxed an environment as possible. Equally, if you have budgeted money for resources that are not working for you, that you no longer use or need, then now you can reallocate the funds to higher priority projects that support new operational needs and commitments without sacrificing capability.
When you ask, “Why are we doing this?” the answers enlighten and instruct. As professional business consultants, we are always trying to maximize the amount of return on expenditures, without regard to the investment. You should be doing the same.
Today is the time to begin. That allows time to review and analyze, to ask those important questions, and to add, delete and refine your 2017 budget so you begin the year with a clear understanding of how well-established you are financially and where you need to bolster your resources. If you wait, you’ll have the disadvantage of little time to do a thorough job.
So get started. You’ll be complimented for your ideal timing.
In the second article in this series, I’ll discuss how to make sure that your time is truly well-spent, with a step-by-step, how-to guide for building the best, most realistic 2017 budget.
Joe Michels is a principal at Solomon Bruce Consulting LLC in Fort Worth. http://solomonbruce.com