If you think about it, running a small business is an awful lot like maintaining an old car.
Things go wrong, mechanical problems arise, and they need to be fixed.
Would you take your car to a mechanic who randomly replaces a part and hopes the problem is fixed? Of course not, you take it to the person who breaks out the diagnostic tools, finds the problem, and gets you back on the road.
So why, in this technological age, do so many business owners rely on spreadsheets to formulate their budget and "analyze" their profitability? In recent years, business budgeting and forecasting software has allowed many small business owners to isolate and eliminate problem aspects of their business, increasing both efficiency and profitability.
The Old Way of Doing Things Over the past two decades, technology has enabled small business owners to move from tracking their finances on paper, to spreadsheets, and now on to sophisticated business software.
Unfortunately, many people got off the train at the spreadsheet stop.
There was a time when formulating your annual budget on a spreadsheet was the most practical way of doing things.
You had a column for credits, debits, maybe a few for efficiency; you could even take a guess at projecting future financial numbers.
Most spreadsheets even allowed you to make pretty pie charts and line graphs.
One of the main problems with using a spreadsheet effectively is time.
In order to create line item projections, the spreadsheet needs to be so detailed that inputting the data can take hours.
If you keep the books, your time is likely better spent on other aspects of your business.
If an employee tracks the financials, spending hours recording data only adds to your labor expenses.
On top of the time wasted, a spreadsheet does not allow for on the fly re-forecasting when you run into one of the inevitable potholes that all businesses hit.
A Changing of Guard Fast-forward to a day when you have software designed specifically for business budgeting and forecasting.
Instead of being saddled within the confines of your annual budget, you now have software that will allow you to quickly and efficiently adapt to the real-time economic environment.
At the beginning of the year, you had a plan.
If everything goes according to plan then you are golden.
Unfortunately, not everything goes according to plan.
Unexpected expenses creep up, the cost of materials rise; maybe a competitor took more of the market share than they previously held.
Whatever the situation, you have fallen off the pace of your plan, and you need a solution now.
Modern day budgeting and forecasting software allows you to quickly analyze and identify areas of your business that are under performing.
Once you know where your problems lie, you can quickly and effectively determine the best course of corrective action.
Another major benefit of using modern business software is the ability correlate the impact that specific actions or services have on your budget.
The built-in itemization of all functions relating to your business makes seeing the effects of each function accurate and rapid.
Knowing the financial impact that each area of your company has on your overall financial picture allows you to make the tough decisions without all of the guesswork.
Having easy access to each item in your financial scheme lets you know how everything affects your bottom line individually, as well as in conjunction with other areas.
The most successful businesses in the twenty-first century are the ones that are able to adapt to the current environment.
They need to take actions quickly, efficiently, and accurately.
The sooner problems are identified, the sooner they can be corrected.
Incorporating budgeting and forecasting software into your business will keep your old jalopy running as efficiently as the car just off the lot.