On the lead up to our Budgets for Social Entrepreneurs masterclass this month we ask Matthew Walsh of Audeo Accounting why he believes budgets are a critical tool for people setting up or growing a social business.
What is the point of Budgeting? Surely that’s something for the government to announce each year, or for big businesses to control their staff? Neither seems right for an entrepreneur to worry about? Well, actually, yes, budgets are just as useful, if not essential, for an entrepreneur.
I’m reasonably certain you already know how to budget, and that you already do budgeting every single day, you just don’t call it that. When you go to buy a coffee you aren’t surprised when they ask you for money presumably because, at some point, you considered how much it was going to cost you. Once asked for money, you might also reflect on whether it seemed expensive or cheap, and then, once this has been established, you may also go on to consider if the quality of the coffee was equal to the amount you paid (maybe it was really expensive but really, really good coffee), and then finally make a decision about where to buy your coffee from in future.
When managers and accountants talk about budgets we aren’t doing anything different to the coffee scenario above. Budgets are just a documented Plan, against which we can Monitor what we do, and then finally we can use to make Decisions for the future.
In start-up enterprises of any kind there are going to be surprises, some pleasant, some not so. This can rightly bring into questions whether a budget or a detailed plan is actually worthwhile. What we need to do however is think about the budget as being a record of what our original idea and plan was. If things turn out to be very different, then it is important that we understand why, and setting aside some time to reflect on what happened against what we thought would happen (a “budget vs actual” exercise) is the first step towards this. This is how we improve our plans, how we make better decisions, or even of course repeat the good decisions next time around.
Besides making you a more effective manager of a project, budgets are also an essential requirement when you are looking for funding. If you are asking someone for money, it is highly unlikely that they will do so without some kind of document that details what you are going to spend it on. This might be something very simple, or it might be something very detailed, either way it is still a budget.
To explore in detail how budgeting can help both you and your enterprise, the Platform are hosting a workshop on the 19th September in conjunction with Audeo Accounting. Book your place here to create or amend a budget that you can use as soon as you leave the masterclass.
Matthew Walsh is a Chartered Management Accountant with over 20 years’ experience working with organisations in the not-for-profit and for-profit sectors. He currently teaches accounting at the University of Sussex and the Open University, as well as working closely with social enterprises in Brighton and London.