Most companies with sales under $10 million, and some much larger, don’t use budgets to help them meet profit goals. CEOs and operating owners reason that the effort to learn how to build, and then use, a workable budget is just too much. They seem to feel it’s more frustrating than just hoping the numbers will all work out, if they only sell enough products or services. There is no need to quote business failure rates among companies of this size, nor the steady stream of survey findings that say a lack of good management practices is usually to blame when a company falls short of its potential. It would be more productive to follow some tips that make budgeting easier, even if you have never done it successfully, or at all.

The overriding principle: profit planning or budgeting, is far and away the most effective way to consistently meet profit targets and avoid costly surprises. These practices help you to invest what resources you have, to your best advantage — based on careful consideration, rather than on rash, urgent decisions.

Business owners and CEOs need to decide it’s time to begin controlling the bottom line with some of the same tools they use to control the top line. And in the current business environment, the bottom line is more controllable than the top-line.

Tips for your consideration:

Take the time, take the team. A budget is not the forecast you put together over the weekend to impress your banker. It must be the result of coordinated input and effort, by you and your top management team. That means it requires some time and thought, just like any other important project your company takes on.

It takes a little practice, like any new tool. Regardless of how tough it may be to estimate the future, your forecasting accuracy will improve. You’ll be better able to control the results if you actively use a budget. Practice does make (almost) perfect.

Any business can be budgeted. The only question is how much practice it takes to strike a balance between time invested and forecasting accuracy. If you doubt this, remember that virtually every startup business had to forecast in order to receive financial backing. This also includes those trying to do something that had never been done before, making budgeting even more of a challenge.

Use a Gantt chart. This is an expanded timeline, with which you can track deliverable dates for budget completion. As with any project management tool, it will tell you if you’ve scheduled too much to be completed in too short a time, given other business activities that also require your team’s participation.

Don’t try to budget to the last penny. Accurately predicting actual results is not the objective. Nor is the creation of an immovable object. It’s all about giving your company a direction for course correction, with the appropriate level of detail. If you try to forecast every little expense, the details will drive you crazy.

Make the tradeoff s when necessary. You have a finite amount of resources available to you. If you must spend money for something you didn’t budget, then decide what budgeted expense can be removed to “finance” the new item. Without discipline, you will almost always overspend, because there are always good reasons to spend money. Those “good” reasons don’t always produce more profit, however.

You need both profit and cash flow targets. Every budget should have profit targets and cash flow targets, the two bottom line measures are very different and require different attention to control them. If you doubt this, know that every year businesses with smashing profit pictures go out of business for lack of cash.

Use key questions for powerful results analysis. At the end of each month, with budget comparisons in hand, ask your team these key questions:

• How are we doing compared to our budget? Why did actual results differ from the plan?
• What must we do NOW to have a better result next month? How can we keep the positive differences and avoid more of the negative ones?
• What are we learning that will make next year’s budget better?

If you follow these tips when financial forecasting and reporting, you will find your income statement more informative, your bottom line more appealing, and overall peace of mind.