Budgeting : A Failure to Plan is a Plan to Fail


This weekend, I had the wonderful task of creating the budget for our company.  I must admit, this is not a task I enjoy, especially after I missed the mark so bad when I created the budget for last year.  Sometimes, I think this task is best accomplished by a lot of blind guessing.  There are so many variables one cannot foresee when creating projections. 

But there is certainly value in the budgeting exercise.  Comparison actual numbers with the projection helps to see where there are areas of missed opportunities, and also those where you exceeded your best expectations.  This may help to see where resources may be best deployed for optimal performance. 

Budgeting involves more than just the financials, it also involves calendar planning.  One of our missions is to make as many friends with CUs as we can.  The more CUs we work with, the more buyers there are for loans participations, the more opportunities we have for new loans, and the more opportunities we have to serve the industry.  For us, meeting CUs means planned visits to a lot of national and state league meetings.  It also means personal visits with various CUs around the country.  This all involves a bit of calendar planning. 

Budgeting also involves planning resource needs.  This can include any fixed asset purchases and capital expenditures that are required for the continued needs and growth of the business.  Everything from equipment, furniture, office space, technological resources, and real estate should be reviewed as a budget is created. 

Budgeting requires a review of outside resources that are required for the company.  One item I realized when creating this year’s budget was the need to have our logo trademarked and the legal fees that would be required to do that.  I have been on the other end of accidentally using a log that was too close to one that was trademarked.  So, obtaining a trademark which required costs for a patent and trademark attorney and fees to the US Patent and Trademark Office was required.  Other outside resources you will encounter other than legal fees may be accounting and auditing fees, costs for strategic planning, and educational expenses for your staff.

The budget process will also require a look at your team and assess where additional staff or development for existing staff are needed.  This requires more than just money; it also will require time.  Finding options to develop your team individually and also as a group is essential. 

You may have head that a failure to plan is a plan to fail.  I believe that is true.  Planning requires not only the large budgetary process, but also smaller plans that cover various tasks that may take a few weeks of months to complete.  Planning may involve longer terms than the budgetary year.  I once worked with a large construction company that worked on projects that were to begin 5-10 years in the future.  This required a rather long term view of planning that then drilled down to the annual numbers. 

Another saying is that if you do not set a target and then just shoot, you will always hit your goal each time.  That is true if you have nothing to aim at.   Budgeting begins with your goals and then finding what resources you have and need to accomplish those.

Once you have budgeted several times, you realize that when you really nail it on the head, there is still quite a bit of other factors that had to go right that were outside your control.  There is no sense to become over-confident.  If you miss the mark by a wide margin, you need to have the ability to assess where things went awry and how to create the next budget, keeping in mind your present condition and reality.  Overall, I find this process to be humbling.