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Here it is: The real reason your budget needs to balance

by , 03 October 2014
The point of a budget is to ensure you never spend more than you make. This helps you keep your company out of debt and gives you a way to guarantee a profit.

Seems fairly simple right.

It is, yet many business owners still make crucial mistakes with their budgets.

In fact, there's one basic thing your budget must do at the end and if it doesn't then it won't help you do anything.

Read on to find out what it must do so you can effectively control your finances...

 

Ensure your budget does this so you can be sure it's effective

 
Your budget must balance. This is the most important part of a budget because it shows you correctly deducted your expenses from your income.
 
If your budget doesn't balance, it could create a false sense of financial security if you think you have more money than you actually do. 
 
This is a company destroying mistake because if you think you have more money, you might spend more. By the time you realise the mistake, it could be too late and your company will be in debt.
 
You can easily avoid this by using Excel [LINK].
 
This will help you avoid three of the most common reasons your budget won't balance.
 
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Three common reasons why your budget doesn't balance

 
Reason 1: The most common reason for an unbalanced budget is simply incorrectly totalling your income and expenses or deducting them. This happens a lot because you might forget to put a number into your calculator or type in the wrong number.
 
Reason 2: Putting last month's figures for expenses or income. If you use last month's figures it might not be a true reflection of this month's figures which can cause an imbalance.
 
Reason 3: Putting in the wrong numbers into your budget spreadsheet. This is an easy mistake especially if you don't check your figures twice.
 
Be sure you don't do any of these three things in your budget so it always balances.
 

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