Nine Ways to Budget Strategically to Stay on Course

By Tim Berry of Entrepreneur.com

Budgeting is probably the least-loved business management tool. Even the word "budget" brings to mind disapproving accountants and denied requests. And how often have we heard the phrase, "it's not in the budget"? Nevertheless, budgeting is one of the most valuable tools in your management arsenal.

What Do I Get Out of Budgeting?

Let's look at what budgeting can do for your business: Budgeting puts the money where strategy's mouth is. I call it strategic alignment. Spend money on strategic priorities.

It sounds obvious, but during more than 30 years working with businesses of all sizes that are trying to grow, I've seen them do just the opposite: They talk about priorities when they get together, but spend on other things entirely. For example, I worked with a company that intended to emphasize customer service but spent nothing on employee training, more employees or better-quality items to sell.

Budgeting Means Taking the Wheel

The next question is, how will I know whether I'm actually addressing priorities in my day-to-day operations? You think it's obvious, but I've been there: The phone starts ringing, fires need to be put out, days and weeks and months go by.

With the budgeting process, however, you can turn to the numbers and see how your spending breaks down into categories. Compare that to your original budget. Now you have a tool to track your progress and, of course (here's where the management comes in), make corrections.

Budgeting Is Precaution, Safety and Risk-Proofing During a Storm

If the economic news spells a recession, we all run to our budgets to prepare for the storm. If sales go down, we need to recognize it quickly and identify possible course corrections. Usually that means watching expenses. That's all budgeting. Budgeting is about process, not just numbers.