Imagine the embarrassment: You’re a business owner, and you’ve just issued a round of payroll checks. Several of your employees have taken their paychecks to deposit over lunch, but they came back with bad news — the checks didn’t clear, because you didn’t have enough money in your bank account to cover them.

It may sound far-fetched, but this scenario plays out all too often. My father told me once that at his first grown-up job, employees would race each other to the bank on payday to make sure that they got their money while there was still money to get. The company he worked for was on such shaky ground that it couldn’t reliably make payroll. Can you imagine how red-faced that boss must have felt?

There are a lot of things that can cause a business to get into that kind of cash-flow trouble. One of the biggest is bad budgeting, or a complete lack of budgeting altogether. We’ve talked before about how budgets are essential to maintaining our personal finances in good order, and the same is true of business finances. In fact, budgets may be even more essential in business. When done right, budgets can be part of your road map to growth and success. When done wrong, they can lead your business down the  road to perdition. [Read more...]