Operating Costs- Budget Games

Budgeting can be a very powerful, yet underutilized tool. 

• You may not have any budget at all.  You just operate month after month.  You may get lucky, but you may not do as well as you could.  Or problems start, but you do not see them until they get very large.
• You budget your company but not from the owner perspective.  You have a net income target but not an owner compensation target.  You could hit your company income number, but fall short on your return.  Money gets spent elsewhere before it gets to you.
• You have a budget but do not use it.  It sits on the shelf.  It does not get integrated into your financial reporting.  You lose sight of how you are doing.
• You have one, but it is top down.  You own the budget, but nobody else does.  Your team is not operating on the same page.
• Budgeting is a long, laborious process.  Your people spend more time on it than they should.  It drains the energy out of your key people.
• It becomes a game.  Money goes to the best politician and not necessarily where it should go to. 
• It turns into a self-fulfilling prophesy.  People use it to protect turf during the year.  They go out and spend money because they have it in their budget, even when circumstances changed.  It is the use or lose it syndrome.  If they do not spend it, they will not have it for next year.  You end up spending money you did not need to.
• Budgets stay fixed for the whole year, rather than re-forecasting when a big change takes place.  Your people aim for the wrong, outdated target.
• Budgets are fixed only, even though some costs vary with sales.  If sales are down, you could overspend and still look good against budget when you should not be.  If sales are up, you could be punishing people for spending when they needed to for the higher sales.