Businesses with 10 or fewer employees are less likely to have a budget. Skipping a budget can negatively impact financial stability, a new survey found.
WASHINGTON, DC, October 23, 2018 – Most small businesses are operating without an official 2018 budget, according to new data from Clutch, the leading B2B research, ratings, and reviews firm.
Nearly two-thirds of small businesses (61%) did not create an official, formally documented budget for 2018. Small businesses may not create a budget because the task is confusing or because they feel a budget is constraining.
Small business owners who skip a budget, however, may put the financial health of their business at risk, experts warned.
“Without a budget, you have no measuring stick to evaluate your goals and performance,” said Donna Conte, service area leader for accounting services at Warren Averett, a full-service accounting and advisory firm. “[A budget] is part of developing a business and its growth goals.”
Smaller businesses are more likely not to have a budget. Nearly 80% of small businesses with more than 10 employees created a 2018 budget, compared to only 26% of small businesses with 10 or fewer employees.
A budget becomes especially important as businesses grow. But businesses of all sizes can benefit from them.
“As a business goes from $1 million to $5 million to $10 million to $20 million – at some point, you have to create a budget because you don’t know where that ship is sailing,” said Rhett Molitor, co-founder of Basis 365 Accounting, a cloud-based accounting service. “Before you could see ahead of you, but the bigger you get – you’re going to get hit with surprises.”
Small Businesses Often Stick to Budgets – But Some Struggle
Among small businesses that created a budget for 2018, half (50%) spent what they budgeted for in the first and second quarter of 2018.
More than a third (36%), however, say they spent more than they budgeted.
Small businesses can successfully stick to a budget by keeping an eye on their original goals and reviewing their finances regularly, according to experts.
“Don’t wait until the end of the quarter or the end of the year,” Ross said. “By looking at your actual results versus your budget every 30 days, you can see how and why your business is missing the mark and make timely adjustments.”
Clutch surveyed 302 small business owners and managers to learn more about their accounting practices.
Read the full report: https://clutch.co/accounting/resources/why-small-businesses-need-budgets.
For questions about the survey, a comment on the findings, or an introduction to the industry experts included in the report, contact Riley Panko at [email protected].
A B2B research, ratings, and reviews firm in the heart of Washington, DC, Clutch connects small and medium businesses with the best-fit agencies, software, or consultants they need to tackle business challenges together and with confidence. Clutch's methodology compares business service providers and software in a specific market based on verified client reviews, services offered, work quality, and market presence.