Business Budgeting Best Practices
The business budgeting process can be one of the most challenging parts of running a company. Often, there are so many moving parts, different people involved, and competing priorities that if you’re not careful you can end up wasting time and money during the process — the opposite of what you want to come out of budgeting!
True Sky suggests these business budgeting best practices can help you stay on track:
- Link Budget to Strategy
In a study done by PWC, creating closer links between strategy and operations was noted as a top priority for more than half of businesses surveyed. It makes sense. Building a budget involves looking at the overall vision for your company. Without that guiding light, it can be easy to feel pulled in multiple directions. Every department could use more money and resources, but there’s only so much capital to go around. With a strategic plan, deciding where to budget becomes much clearer and making tough decisions that much easier.
- Allocate Resources Strategically
As mentioned above, once you have a plan, the business budgeting process becomes a lot simpler. For example, if your company’s goal for the next six months is to increase sales by 25%, it may make sense to allocate more budget to the sales and marketing department. If, however, your company’s priority is innovation, then giving more funding to the product development and market research team might be more strategic.
- Keep the Annual Budget Process Under 28 Days
One of the top budgeting complaints is that it’s slow. Some companies can take months to complete the annual budgeting process — way too long. The best practice for many is to keep it under 28 days. This gives enough time to get documents in order but keeps the process succinct enough that it doesn’t drag on.
- Perform What-If Analysis
Often, developing what-if analyses can be thought of as too time-consuming to be part of the budget forecast, but in reality, it can save time and money in the long run, especially if your business is operating in a more volatile market. Gaining insight on multiple variables can help with better decision making and trends are easier to spot.
- Review Regularly
Many businesses are moving to more of a rolling forecast in their budgeting. Even if you still stick to the traditional annual process, allowing for monthly re-forecasting and reviewing will help you stay flexible and on track, not to mention make the annual process less stressful when it comes around.
- Use Technology to Simplify the Process
Some tools can significantly enhance the budgeting process. Take True Sky, for example. Our budgeting software uses Microsoft Excel to make workflow simple and transparent. Which manager needs to approve this budget next? Who still hasn’t seen it? Has every department entered their data? What are the next steps? True Sky eliminates the questions and the confusion by streamlining the workflow process, allowing for easy collaboration, and providing real-time updates to every user.
These business budgeting best practices can help make financial planning that much smoother — not to mention save time and money. It’s a win-win.
Ready to learn more? Join us for a webinar… Best Practices for Budgeting, Planning and Forecasting.