Are you running a small business, social enterprise or arts organisation but aren’t sure if budgeting really matters? Well, it absolutely does! In this weeks I Hate Numbers podcast I discuss the importance of budgeting and show you why it should be an integral part of your plan for success.

Budgeting is essential for success and there are multiple reasons why. It promotes smarter decision making, helps track progress plus so much more.

Fasten your seat belts SMEs - here comes 8 solid reasons why effective budgeting should be top of mind for any serious business!

It’s amazing how many small businesses, SMEs, and arts organisations – you know the ones, that are always just teetering on the edge of making it big or going bust.  They either don’t bother with budgeting or do it all wrong.  I get it: budgets can be complicated and a chore to set up… but there's actually an incredibly simple reason why budgeting is so important for any business (yes, even yours!).  It doesn't have to be difficult; in fact, if done right budgets can propel your organisation into productivity overdrive! So why exactly should you budget? Listen to this podcast on The importance of Budgeting and I'll explain why.

Conclusion and good to know

The importance of budgeting can't be stressed enough. It doesn't matter whether you're a small business, arts organisation, social enterprise or all of the above combined. Budgeting is essential for any successful venture. If you've been avoiding this task like the plague (trust me, I understand why), it's time to finally confront your financial fears and start setting budgets!

Approach the (not so) dreaded B word Budgeting with the right attitude.

Thanks for listening.

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Budgeting is one of those crucial financial habits, those crucial financial behaviors that you should be adopting in your business. In this podcast, I'm going to give you eight reasons as to why budgeting is so important. Whether you are a solepreneur, an SME, an arts and social enterprise organization, it matters

not. Budgeting is a vital tool to use in your business.

You are listening to the I Hate Numbers podcast with Mahmood Reza. The I Hate Numbers Podcast mission is to help your business survive and thrive by you better understanding and connecting with your numbers. Number love and care is what it's about. Tune in every week. Now, here's your host, Mahmood Reza.

Hi folks. My name is Mahmood. I'm a finance coach and author of the book I Hate Numbers and for over 27 plus years, I've been helping thousands of business owners make more money in their businesses, increase their financial awareness, reduce the anxiety they face in their business, save tax, save time, and help them aspire and drive forward to achieve the business they want.

I'd love that for you as well. Let's crack on with a podcast. Now, I said at the beginning, I've got eight reasons to share with you as to why budgeting is an important financial habit. You may have more to add. If so, let me know. Send me a comment and tell me if you agree with my eight important reasons and if you have anything to add.

Let's start with reason number one. Reason number one is planning. Planning is that vital tool that we have in our armory. Where we connect our goal with actual realization. A goal without a plan is merely a wish. All successful businesses, anybody who's successful in their profession has a plan as to how they're going to reach their end goal,

how to reach their Northern Star. And a budget is an expression of that plan in financial terms. When you've got a plan, you are more likely to get to that end point. If you've got a plan that's flexible, that's being well thought out and constructed, then you've got an advantage over those who do not. Reason number two is about control, and when we hear the word control, it has negative connotations for some, but control is a good thing.

Control helps you reach your objectives, and the budget is a fantastic control device. It tells us financially where we expect to end up, where we want to be, and as we progress on our journey path going towards our end goal, our Northern Star, we monitor our progress and we can measure that and compare that against where we thought we would be.

If, for example, you are expected to generate sales of a certain value in a particular month. When you actually look at what you've sold and you measure those two numbers, you compare them, you are either on target, you're below target, or over target. Having that in place means that we can actually investigate where we're going wrong, and it's fantastic.

We can apply the same for spending and we can also make our team responsible for certain areas. So control is a wonderful thing. It means we stay within the lane we set ourselves, and we don't deviate too far from our path. Reason number three, risk. Risk is something we can never eliminate from our business journey, but having a budget,

going through the process of budgeting means that we can identify what lies ahead. Looking through the windscreen of our business, we can identify those potholes, those trip wires, those things that are likely to be hazardous, and we can scenario plan, we can make contingencies, we can minimize and have a plan to deal with those risks that are going to be in front of us.

Having a zero risk, by the way, is pretty much an impossibility. But budgeting is great at identifying and mapping out where those risks lie and helps us to manage and mitigate those risks that may occur. Reason number four, allocation. In our business, we have resources of various descriptions. Resources,

some people may see these as costs. These are resources that we deploy, whether they're financial resources, whether they're skills resources, whether they're assets that we have in our business, and we allocate those resources where they're best served. By producing a budget, by going through that process of budgeting, we can decide where we allocate our resources.

That generates the greatest value, that helps us with those improvements that we want in our business, helps us identify where not to allocate those resources. We're pretty much over halfway now. Reason number five, now, it's not number five, cuz it's less important. It's about well being. Budgeting has been seen both in a business context and by the way, folks in a personal context to reduce stress, to minimize anxiety, and really reduce those angst that all business owners will face.

Having an idea of what lies ahead. No sudden surprises means that our stress levels goes down, and there is a correlation between our wellbeing and how we handle money and money and how it impacts our wellbeing. Budgeting for me, gives a greater degree of clarity, a greater degree of certainty. We can anticipate what lies ahead and we can do things about that.

That sudden surprise, that sudden shock to our systems is what really powers on the anxiety, and we don't want that. Motivation, that might seem quite strange, but motivation is factor number six. If you are involved in setting your goal, setting your targets, if your team participates in establishing their own targets, those targets that aren't too soft, but not impossible, they're stretching,

then we are more likely to be motivated to aspire and achieve those goals, to hit those targets. Having people participate in putting together that budget, having people participate and then be involved in the budgeting exercise motivates them to achieve much more. And studies have found that motivation comes about by effective and proper budgeting.

Then we're coming down to the final stretches. The last two reasons why budgeting is so important. Now folks, let me just have a pause here. If you are thinking this sounds really quite a lot to take on board Mahmood, you know we are gonna have challenges with the numbers and the format and the formulation. Just check out the show notes and check out the Numbers

Know How platform. We've got a fantastic SaaS online product here whereby you can put together your own organizational business plan, financial plan. You've got graphics, you've got an easy user interface, you've got resources that will help guide you on that budgeting process. Let's get back to our last two reasons.

Performance, evaluation, budgeting, and the budget that it produces is still one of the most popular performance mechanisms that businesses adopt. When we measure our results, when we measure our progress against the targets we've set ourselves, then that tells us how we're performing. It can tell us how our team are performing.

And as a performance evaluation tool, budgeting lends itself to great opportunities. So let's recap where we are so far. We've talked about planning, we've talked about control. We've talked about risk management and risk mitigation. We've talked about a great way to allocate resources in our business. We talked about the impact on our wellbeing.

We've talked about motivation. Motivation comes about from effective participation and helping set those targets. We've talked about performance evaluation. Our last thing is in terms of that goal achievement. All things we do in our business, we have to have a Northern Star. We have to have an end point to achieve.

In all budgeting scenarios that I've been involved with, all the clients I help on a one-to-one, putting their financial plans together. Our start point is the end point. Where is it you wish to be in 12 months, in two years, or three years time? What is that journey path we must undertake to get to that end point, and then we could start thinking about the numbers.

We can start thinking about the finances that are required. So achieving your goals, achieving your targets that you set yourself, and we must have targets to aspire to. Budgeting helps us with all that. Now folks, that's eight good reasons why budgeting is so important. Do you have any to add? Do you have any to share?

I'd love to hear your thoughts. I'd love to hear your comments. I hope you found this podcast of value. If you found it of value, I'm not gonna get embarrassed, I'd love it if you could leave a comment, leave a thumbs up so it can be shared wider. If you feel there are people in your network that could benefit from listening to the podcast, I'd love it if you could share it with them as well.

Until next week, folks, happy budgeting. We hope you enjoyed this episode and appreciate you taking the time to listen to the show. We hope you got some value. If you did, then we'd love it if you shared the episode. We look forward to you joining us next week for another I Hate Numbers episode.