“Inspect what you expect” is a fairly tired saying; but no less true than it ever was. I manage a team blog that my co-workers and I regularly contribute to. Last week I noticed that our traffic from Google Search had fallen dramatically. This is a concern because organic Google search results are free traffic to our website, and they had suddenly disappeared. So I started investigating, and learned a lot.
But why is this important to you? It illustrates the wisdom of the earlier saying. If a process or an activity is important to you, you probably have expectations about its outcome. And you can’t assume that the outcome will just naturally result. You have to monitor and manage the process or activity to ensure that the results are what you expect.
I work with about one hundred organizations every year, and I am amazed how many of them do not develop operating budgets. It seems like a simple thing to do, but people don’t do it. And if they do have a budget, it is regarded as a historical document; rarely to be examined or referenced.
On the other hand, the most successful business people I know, create, revise, monitor, share, and analyze their operating budgets on a weekly and daily basis. I once worked for a daily newspaper, and the business manager planned the size and advertising space for each daily paper a year in advance. He analyzed the advertising content of each daily publishing and compared it to his expectations throughout the year.
As a Controller for a company with huge working capital requirements, I modeled customer cash receipts on a daily basis, months in advance. As the company went about its business, I could tell in the first week whether I was going to have a problem, instead of waiting for week four or five of the month. This gave me a big advantage in managing the business.
If you’re devoting your time to a business, you really need to develop an operating budget and monitor your actual results against the budget.
Every business will have its own business drivers that should be budgeted. It’s up to you to identify what they are and how best to quantify them. And a budget does not have to be tracking just money. You likely have non-monetary business drivers that affect your business results, such as new client sign-ups, lost clients, employee turnover, etc. Budget these items as well.
It’s up to you on whether you want to share the budget with others. But my experience is that a budget becomes a much more effective tool if others are involved.
Finally track your actual results against the budget. Do it on a daily basis, if that makes sense; it probably does. Analyze the results. You will find variances that are unanticipated results, and variances that indicate inadequate expectations.
If you determine that your expectations are incorrect, change the budget. There’s nothing wrong with that.
If you plan and monitor your business activities you will find that it’s much easier to manage your business and reach your goals.
I work with small and medium sized businesses, analyzing their current and future systems needs. I work primarily with business application software such as ERP, CRM, and Information Worker (IW).