Budgets are a mechanism holding influence over the future of every business. Most entrepreneurs have a mental picture of cash flow for the next few weeks. Neglecting to transfer this vision to a written 12-month budget leaves the main goal of long-term sustainability untouched. A little short-term success does not legitimize continuing violation of common sense planning.
Business owners who hate budgeting are like homeowners who are annoyed by electronic security systems. If only those distractions went away, life would seem carefree. Budgets, like security systems, are not impediments; they are mainstays of safety. Stress and trauma over a budget is the result of how the process is practiced. Fixed budgets have no value after reality conflicts with expectations. A rolling budget resolves this by permitting revised projections based on unfolding experience.
A rolling budget is continuously updated with recent financial results. They start with projected revenue and expenditures for the upcoming twelve months. Actual numbers in the first month replace the predicted numbers to reveal a new projected outcome for the subsequent eleven months. Tweak the upcoming eleven months to reflect your objectives. Then add a new twelfth month so that you’re always looking a full year into the future.
Rolling budgets are perpetually consulted and thus drive a shift away from guessing about the security of your next spending initiative. Worry is eliminated over whether you can afford major purchases – like a computer upgrade. The rolling budget removes concern about how to handle rising costs in some areas by budgeting for reductions in other expenses or planning for increases in your prices.
The Finance Writer 