Companies must take control of their finances in order to survive the current economic uncertainty and ever-changing market conditions. One of the cornerstones of ensuring financial health is making certain you’re employing best-in-class budgeting
What Is A Corporate Budget?
It’s a carefully and accurately constructed strategic financial plan, across all departments for a specified period of time, concerning the revenues and expenses of an organization. Cash is one of your most important resources and must be used correctly.
Why Is Budgeting Important?
should serve as the business’ guideline and roadmap for achieving leadership’s objectives and goals. It should also project, manage, and provide data intelligence into financial status.
Understanding your numbers is knowing your business. You must know your business in order to make the best business decisions. The top five most critical reasons for budgeting are:
To clearly define business objectives – including profitability, cashflow, forecasting, etc.
To determine the sources and volumes of sales revenue.
To understand production expense requirements – labor, materials, overhead, etc.
Knowledge of performance and efficiency.
To realize targets – monthly, quarterly, and annually.
Timeworn Budgeting Hurdles:
No longer can an organization afford to utilize the old school method of “incremental” budgeting, whereby previous years’ results are adjusted by a percentage, business leaders then cross their fingers, and ultimately just hope for the best. This method delivers too many inaccuracies, as it doesn’t account for changing market conditions, and is more susceptible to misuse by departments who over-budget simply to be safe.
Also, in this method, expenses are often not linked to any form of activity. Therefore, they are merely guesstimates. For example, projected increases in sales will require more materials and labor. A change in efficiencies of production will cause a change in labor hours. These older methods and systems of budgeting require that any changes have to be recast manually. These processes take too long and are too costly of an exercise.
Best-In-Class Budgeting Strategies
The best companies with the best budgeting practices are those who’ve adopted more meaningful methods of budgeting, along with innovative technology solutions, to support automation. To ensure your organization stays ahead of the curve, you should:
1. Integrate Top Down Bottom Up Approach –
this method couples corporate strategic goals with the ability to operationally manage and adjust projections, while using pertinent field knowledge of customer strategies and critical business drivers. There is shared responsibility for budget refinement between managers and employees, with increased involvement, along with improved efficiency and accuracy. The understanding of how business drivers affect one another is vital in decision making.
2. Ensure Thorough Planning & Clear Communication –
you will need buy-in and input from all key decision-makers. This requires important planning and communication within and between all departments.
3. Define Clear Goals –
these must be realistic and attainable.
4. Utilize A Budgeting Technology Solution –
this is a critical component of allowing you to save time and money in the budgeting process. Here’s how it revolutionizes the way you budget:
- Automates Everything – your budgeting, planning, and reporting can be accomplished with minimal time and effort.
- Plans For What-If Scenarios – you see the impact of your decisions before making them. You can generate multiple scenarios and visualize the results of each potential outcome.
- Improves Accuracy – you need an automated single source of truth. This can only be done by utilizing a technology solution that can bring in all of your data in real-time – whether that be from multiple ERPs, spreadsheets, or other data sources.
- Provides Flexibility – today’s marketplace requires the ability to quickly and easily change your budgets on-the-fly. During this year’s pandemic, many organizations have been forced to scrap their annual budgets, which took months to build, for entirely new ones.
- Enhances Insights – With all of your data integrated into one system, you have greater insight into the significance your metrics have on your budget. With a good tool, you will automatically get dashboarding and reporting tools out of the box, providing a big picture view of the health of your organization, along with a robust analysis of where you’ve been and where you’re going.
- Streamlines Communication – you can’t afford to have information silos. All planning must be aligned across your entire business. An integrated technology solution will provide this, and all without leaving your desk. In the past, organizations have spent countless hours trying to coordinate between different departments and navigate competing interests.
- Gives Deployment Options – you get the ability to use the technology solution either in the Cloud or on-premise. This allows you to decide what makes the most sense for your organization.
Companies that utilize all of these strategies have a 53% greater competitive edge and improved flexible management capabilities. You no longer have to waste time trying to find your data – let a technology tool, like Synoptix, do the heavy lifting and deliver your data easily, so you can quickly make the best decisions for your organization.
For a more detailed look into the future of budgeting, join our free virtual Synoptix Summit session – Budgeting for 2021.
Jeana has been in the software industry for 15+ years specializing in ERP reporting solutions. She has decades of experience in creative content development and marketing and enjoys exercising, traveling & spending time with her husband & twin boys.