Entrepreneur: How do you introduce budgeting to new entrepreneurs?
Julie Aydlott: New entrepreneurs tend to drop the ball because they focus on their business rather than its accounting. In the first chapter [of The Quick Guide to Small Business Budgeting, I discuss] personal budgeting. [The example character asks,] What do I have, and what will it take to make sure I don't miss my mortgage payment as I put all my money [into my business]?
Entrepreneur: What are the most common budgeting mistakes entrepreneurs make?
Aydlott: Once [they] start generating substantial sales with a profit margin of 20 percent to 25 percent, they're on cloud nine and start spending money like [crazy]. Then they can't make payroll, they can't pay their vendors and they don't know what happened. The other big thing is the October Effect, a trend of sales dropping [due to stigmas attached to past] stock market crashes and 9/11. If you don't plan for the worst-case scenario, you'll be hurting in the last quarter. If you plan for it and cut back [accordingly], you can make it through.
Entrepreneur: How can entrepreneurs approach their budget in a positive way?
Aydlott: If you have a good budget and know what it takes [to maintain it], you'll be a step ahead. You might enjoy accounting after [thinking] you hated it so much. If you don't get to know your money, then how are you going to enjoy it?