| October may seem like a strange time to talk about budgeting for your business, but any time of year is a good time to review how your business is tracking against your projections. At Red Wing Software, we’ve already started the planning process for 2022. Whether it’s planning for next year or comparing this year’s results to what you were planning, looking at your actual numbers compared to your business plan for the year should be something that happens regularly. |
| To illustrate, I’ll use a couple of Red Wing Software examples of why this is important. Each manager of their respective department is responsible for creating their budget for the coming year. Of course, not only are expenses projected, but revenue is also part of the budget. For example, each Sales Representative puts together the sales goals they expect to achieve monthly, and how they expect to achieve those goals. Sales numbers are then measured throughout the year daily, so we are aware of how we are performing compared to our projections. If sales numbers are not what we expected (either lower or higher), it is important to know the reasons and react quickly to any discrepancy. Of course, if sales numbers are higher than we expected, we want to know why and keep making decisions that ensure continued success. |
| On the expense side, you obviously want to make sure you are not spending money that was not budgeted without a serious look into why these expenses were increased. Also, and this may sound strange at first, you want to make sure you are spending all the budgeted money unless there is a good reason for not spending it. For instance, our Marketing Manager budgets to spend a certain amount on very specific items; whether it’s advertising, trade shows, web presence, travel, or other things, it is important to stick to this plan. If marketing dollars are not spent as planned, the result could very well be a decrease in revenue. It can be a delicate balancing act. |
| We are fortunate at Red Wing Software to have seasoned, experienced managers and staff who are very good at planning for their respective departments. Our revenue and expense numbers are typically within two percent of their projections. I believe with practice, discipline, and timely analysis, most businesses can be equally accurate in their planning process. |