Creative business owners often need management tools for running their shops. These tools help relate the financial information with the overall performance of the agency. One of these tools are financial budgets. Budgeting may be one of the most important accounting tools you can use in your business.
Creating and tracking financial budgets provides many benefits to your company such as letting you adjust spending, increase sales efforts, and know how to react to an unexpected drop in revenue. While there are many benefits to budgeting, this tool can be damaging to your agency if not prepared correctly. For example, budgeting just to put limits on spending might keep you from being able to react early on to market fluctuations.
Some of the benefits to budgeting include:
Creates Financial Roadmap
Budgets act like a financial GPS for your company. They let you set your goals and priorities telling you when and where to turn along the journey. They will quickly identify bumpy roads and show you where to make adjustments to get back on the right course.
Establish Pricing for Profitability
More and more often I hear my clients say they decide what to charge their clients based on what they think the client will pay. Not only does this approach leave money on the table, it may put you out of business. Budgeting is a valuable tool that helps you set pricing based on financial facts, not gut guesswork.
Forecasting
You get an RFP from a client that is a perfect match but can you afford to spend the money to stay in the fight with your competition. Having a budget not only provide the answer to this question, but it makes sure you have planned and are ready for the moment. Budgeting for future growth opportunities ensures that companies have enough funds on hand to make quick decisions for expanding business operations.
Some people see budgets as a way to give departments their allowance for the year. While this is one of the benefits of budgeting, there is so much more that budgeting will provide your company.
Not sure the best way to create and/or take full advantage of your budgeting processes?
This is one of the areas covered in our upcoming two-day workshop “Money and Finance for the Creative Industry” where attendees will not only learn the how’s and why of financial budgeting, but you will leave with an actual budget for your agency.
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