Budget Sense

Get your books on track with tips from author and expert Julie Aydlott.
This story first appeared in the May 2008 issue of Entrepreneur. To receive the magazine, click here to subscribe.

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?

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