The “B” word…Budgets…A waste of time

Budgets in entrepreneurial companies don’t work. Sooooo don’t bother. Feel better?

Yes, I’ve spent a great deal of my personal life developing a software program that can be used to prepare budgets and I think budgets are a waste of time. Forget budgeting. Predict.

It is crucial for management to know at all times what is going to happen. The only document available to provide management a clue as to what lies ahead is a well thought out dynamic (always changing) financial forecast.

Tired from sleepless nights? Do you know what keeps you up? Fear of the future. Not knowing what is going to happen.

Do you love you the accountant who keeps telling what has happened? Wouldn’t they be more valuable if they tell you what is going to happen? You can’t change the past but you certainly can change the future.

At all times you must always know the answer to these 3 crucial questions:

1.       How much cash will you need?

2.       When will you need it?

3.       Where will you get it?

The dynamic forecast should consist of a forecasted Profit and Loss, a forecasted Cash Flow and forecasted Balance Sheets. All three are a must. Why only predict the Profit and Loss when it’s the cash flow that will keep you up?

Remember the only thing you can manage is the future. The more you know about what is going to happen the more effective you can be as a manager.

So forget about budgets. Keep an eye on what lies ahead.

We would like to receive comments and questions… lets have some fun!