Managing to a Budget

Tax Professionals' Resource
October 16, 2012 — 1,046 views  
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Managing to a Budget

When you work as an accountant, either in a corporate setting or a private one, there are three key issues that you must always face when trying to stay within a budget. These three issues can be frustrating at times, but understanding how to deal with your corporate managers or private clients when these problems arise is the key to your success.

1. Unstable Income Levels. One of the hardest issues an accountant faces when trying to maintain a budget is unstable income levels. If the business generates a high amount one month, and way below that level the next, it is hard to maintain a budget. While this scenario may happen occasionally, when a business consistently bounces from high to low income, specific steps must be taken.
As the accountant you must manage the bills based on the lowest income level. Each time there is a surplus, advice your clients to invest into the company with cash or save for a rainy day. Advise them not to extend any new lines of credit with the thought in mind that the following month could be a low income month again.

This can be very hard on the accountant who is faced with telling a business owner or corporate manager what must be done to stay financially sound. It is human nature to want to spend-spend-spend, and pay for it all later.

2. Unrealistic Goals. Accountants often face business owners or managers that have unrealistic ideas when it comes to their money. They believe that if they brought in a specific amount of income, all of that is accessible to spend. They often forget about the bills, taxes, and staying within a budget.

Other managers may have unrealistic goals set for paying off debt. They believe every extra penny should be paid into debt, even if this means sacrificing in other areas of their business. While it is admirable that a company wishes to become debt free, it is also an unsustainable practice. 

Work with your clients or managers about a debt repayment plan that will allow the company to pay down high interest debts first, while saving for a rainy-day fund. This will help you as their accountant balance the income of the company, while preventing a monetary disaster if a crisis occurs.

3. Uncontrolled Spending. This situation is most common for accountants that have a private practice. Many businesses or individuals seek the assistance of an accountant because they are not good at tracking their money. However, these same individuals once they have hired an accountant no longer act responsibly with their spending.

Each month the accountant receives stacks of bills to pay and balance, and later, when the balancing is complete, the client is angered by how little money they have left.

This is a tricky situation to deal with as an accountant. You have to work with these clients in a manner that encourages them to set aside their spending money and stick to a budget. You will have to be ready for resistance and anger. You will also have to be ready for them to walk out of your office.

Take your time and gently teach them how to budget. Overall, most clients will respond well with time.

 

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