8 Ways to Make a Budget Work
   By Jeff Wuorio

If you build it, stay with it. Put another way: If you've put in the work and created a business budget, follow it! If you don't, you'll lose the benefits that you planned for when you built the little monster. Jeff Wuorio has the inside scoop on common problems and easy solutions for established budgets.

Get started by reminding yourself that your business budget is not a monster. It's nothing more than a set of guidelines for your spending and saving habits. Below, I've laid out some common problems that pop up with many established budgets, along with some solutions that can help you stay within budgetary guidelines.

1. Accept the learning curve.
Living with a budget is an education. Trimming your expenses, knowing how long a paycheck is going to last or how much of a cash reserve to keep aroundóworking these skillfully will take some time. But you can learn to adjust a budget as you go, and what was once a shot in the dark gradually will become a more predictable and useful practice.

2. Be prepared to miss your budget estimates and act accordingly.
This was rule No. 1 in setting up a budget: knowing that your budget projections are a best guess and nothing more. Notes Mark Weaver, associate professor of management at the University of Alabama: "You're going to miss your estimates. That doesn't make you unintelligent or a bad businessperson. Instead, try to miss them intelligently and in ways you can correct."

For example, if you budgeted $200 a month for long-distance phone service and your bill consistently tops $250 - say, for at least three months running - adjust your phone allocation up $50. By the same token, if the bill is only running an average of $150, you can trim your phone share. To keep things in line as much as possible, try to reallocate some other area of your overall budget to account for the adjustment.

3. Work flexibly.
As with setting up a small-business budget, sticking by one often boils down to a willingness to be flexible. For instance, if your revenue doesn't match what you expected - and there's a good chance that might be the case - trim back your expenses to compensate. By the same token, if you're taking in more than you anticipated, it might be time to invest in better equipment.

4. Watch your cash flow.
If you want to stick to a budget, make sure that your inflow more than compensates for your outflow. Monitor your income closely to make certain that you'll have adequate funds to pay your bills, particularly if your business is prone to long lapses between paychecks. Notes Weaver: "Even if it's just from the left pocket to the right pocket, cash-flow problems are what kill most small businesses. Keep checking
to make certain that your revenues match your expenses."

5. Err on the side of conservative.
When setting up your budget, it's a good idea to overstate your expenses and lowball your expected revenue. That approach is also a solid
strategy when making sure your cash flow is going to hold up. Look into budget savers such as telephone calling plans, less expensive office furniture and other ways to lessen the burden on your income. "People always feel they have to have the best computer," says Weaver, "but money you don't spend is money you don't have to earn."

6. Nurture a cash cushion.
The uncertainty of budgeting - both in terms of income as well as expenses - stands as one of the biggest threats to the survival and success of any small business. While trimming expenses to the absolute bone is always a good idea, it's also prudent to set aside income whenever possible. If you can afford it, earmark a portion of every paycheck you get and sock those funds away in a money market account. Not only
can that money come in handy for predictable expenses such as year-end taxes, it also can prove an absolute lifesaver should an unexpectedly high bill suddenly crop up.

By contrast, if you're thinking about starting a business sometime in the future, start saving - the money you set aside now ultimately may bail you out in ways you can hardly imagine.

7. Check your budget every month.
This is a point that I cannot stress enough. Go over your budget every month and examine your cash flow to make certain your available
funds are sufficient to meet your liabilities. If you're following point No. 2, above, and adjusting your budget as you go, you'll have some sort of emergency fund to take care of monthly overruns. Use it when things cost more than you thought and put money into the contingency fund if you come in under your expected numbers.

8. Use your budget as a form of restraint, not constraint!
Setting up and sticking to a solid budget is the most effective teacher of fiscal discipline there is. But don't be shy about busting your budget on occasion should something truly warrant it. It's often impossible to budget for a valuable last-minute seminar or a trip to a trade show to make valuable contacts. If you are too rigid with your budget, you'll refuse to spend when you really should. "Don't be afraid to go beyond your budget to spend money that's a valuable investment in your business," Weaver says. "A good budget is great, but don't let it dictate your business."

---Source: Jeff Wuorio is a veteran freelance writer and author based in southern Maine. He writes about small-business management, marketing and technology issues. Article originally published by Microsoft Small Business Center (

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