Stay on the Lookout Monitor your budget on a monthly basis. Many companies just divide every expense by 12, but that’s the unsophisticated and least helpful way to look at all this. Instead, break your volume (revenue) down by your typical seasonal swings. Maybe January and December are weak months for volume. Look at the past couple of years by month and attempt to project how your volume will come in. That will also give you the typical job costs for those months.

Now, break down monthly overhead, which tends to be steadier. But still, don’t go to the divide-by-12 rule here. Your rent may be the same each month, but if you pay payroll every week, some months will have four pay periods and some five. You may pay insurance in chunks rather than monthly. Your new clerical person won’t be hired until July, so their expense won’t hit until then.

Put this extra work into your budget and now you have a much more useful budget that will predict when you will have negative net profit months — even if the year ends with a profit. Now you can have a monthly Budget to Actual report that is much more accurate.

Take It Further Some companies take this a step further and develop a “waterfall” budget that drops the actual P&L into each month as it occurs and then redistributes the variances that result over the remaining months. Do this and you’ll have reached Budgeting Nirvana!

So even though May is upon us, if you’re going bare (without a budget), please cover up now! —Linda Case, CRA, is founder of Remodelers Advantage Inc. in Fulton, Md., a company providing business solutions through a network of experts and peers. 301.490.5620; linda@remodelersadvantage.com;www.remodelersadvantage.com.