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Are You Budgeting Strategically?

All too often, it is easy to fall into the trap of using a budget to maintain the status quo. The sales department spends X dollars on employee expenses, so we will put that in. The telephone system costs X amount, so that goes in. After we tally up the expenses, we will need X in revenue to make a profit.

Your budget should be realistic, yes, but as we have been talking about it also needs to be strategic –and that is why you need to budget for the right things.

What are your strategic goals for the year ahead? Perhaps:

  • The sales department needs training (which will in turn result in increased revenue).
  • You have an IT strategy plan and want to invest in a new cloud-based software system to automate your employee expense process (which will in turn decrease administrative costs).
  • The marketing team has pitched an idea for a new campaign to identify more leads (which will drive product sales).

All of these goals pay off in the long run, but require an upfront investment, and likely some pre-planning. If you are not budgeting for them, it is easy to either go over budget, or have them fall off the list completely.

Fixed expenses will never disappear altogether, but you need to make sure that you are investing in systems that move you towards your strategic goals. Sometimes this involves making hard decisions. But if you have vision, those decisions can be justified.