Why Bother With Budgets?
Here we go again, it’s year end and budgets time – why bother?
John Sollars of Stinkyink.com reflects on his dislike of doing budgets and questions their value.
If there is one job I really hate at this time of year it is doing my budgets for next year. I know that theoretically you need something to measure yourself against, some plan which you can show to important people when needed, but I have to ask occasionally – am I wasting significant amounts of time looking at spreadsheets which won’t actually benefit me?
I know that in September, when I was looking through the P&L, I could see that we were ‘up on budget’ and ‘down on budget’ in various areas, but did that actually mean anything at all? The fact was that back in November/December last year, when we set the 2012 forecasts we couldn’t foresee some expenditure that actually occurred in September. We weren’t able to plan for people leaving us and new starters, nor for that ‘marketing opportunity’ that I was convinced was going to make us millions.
Let’s look at the pros and cons of planning
On the positive side it makes me sit and think about every line of expenditure in a very analytical manner. The two key questions that I have to answer at this time of year are what are we going to sell in 2013 and can we reduce our overheads? And if so by how much? I can see it’s a good discipline to think about where we are and where we want to be.
On the other hand it can be a purely theoretical exercise. Can I influence what impact the Greek debt crisis is going to have on the Euro and thus the UK’s economy? Can I influence what the Chancellor will do in his budget in the Spring?
All I can really do is use my best judgement and experience to come up with achievable numbers based on history. Whilst the more numerically-minded amongst you may love living your life in a spreadsheet, I like to think that I am more balanced and not necessarily an Excel fanboy, which means that once the base information is typed in, I’m off doing something else. I have always been a hands-on man who will never run the business from behind a computer screen!
Is it an excuse for not doing anything creative? I’m up to my armpits in numbers so can’t be disturbed; I’m formatting a spreadsheet therefore I’m busy. Is it an excuse to put off doing something else which just may be more important? Worse of all, am I writing this just to put off the awful moment of opening that bloody spreadsheet?
I guess I have to do it, after all my bank manager and other stakeholders like to see nice rows of positive figures, and doing the exercise can flag up underlying issues with the business – know that. The issue for me is come next September, will it be at all relevant?