Clarity is power. The clearer you are with your business goals, the more likely you are to achieve them.

Creating a budget forces you to drill down into the details of your goals. It prods you to think about how one business decision affects all other aspects of the company's operations.

Example: Say you want to grow your sales by 15% this year. Does that mean that you need to hire another salesperson? When will the business start to see new sales from this person? Do you need to set up an office for them? New phone line? Buy them a computer? Do you need to do more advertising? How much more will you spend? When will you see the return on your advertising expenditure?

You see, a budget is really a planning tool that makes you clarify your dreams, and planning is the first step in making your dreams real.

 

Once you've clarified your goals, you can start making business decisions to help you reach your desired outcome. Some of those decisions will be great and give you better-than-expected results. And, understandably, some decisions will give you poor results.

This is where the “Budget versus Actual” model shines.

When you compare your budgeted sales and expenses to your actual results, you see exactly how far off from your original plan you are. Sometimes, you need to adjust your plan, and sometimes, you need to focus more attention to the areas of your business that are not performing as well as you planned.

Either way, you are gleaning valuable insights into your business.

It's like sailing a boat. You are off-course most of the time, but having a clear goal and making many adjustments helps you reach your destination.

 

Nike knows the power of the phrase, "Just Do It."  We often know what we need to do but don't take the necessary action.

It may seem like a huge hassle to create a budget and then create a “Budget versus Actual” report every month.  But as with any new skill, although it's hard at first, it does get easier.

You'll feel energized after it's done. You may even have fun.