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Finding a Balanced Budget: Too Detailed vs. Not Detailed Enough

A balanced budget can mean several things. It can have the traditional meaning of balancing your expenses and income so that you do not run a deficit. But it can also mean balancing your time and business resources during the budgeting process.

Your budget tells a story about your business and can point to where you want to go. If your budget is not detailed enough, it does not hold much relevance to your organization. Ideally, you should be able to look at your budget and understand what each line item represents and what is included.

On the other hand, creating a budget that is too detailed can eat up time and money. Do you really need to know in your corporate budget how much money is being spent on pens for sales staff? Probably not.

So, how do you decide how much detail to include in your business budget? The answer lies somewhere in the middle.

To start, consider the scope of your budget. An overall budget for the whole organization is going to require less detail. But as the budget shrinks in scope, for instance departmental budgets, those details become more important. And project-based budgets should be even more finessed.

Take the example of launching a new product.

On the overall budget, the new product launch might just be one line and budget. Perhaps it is split into a line item for the marketing department and a line item for the sales or shipping departments — but it really does not need to be much more detailed than that.

Then consider the marketing department budget. This would be more detailed. There might be a budget line for “Product Launch Party” and another for “Social Media Campaign.” But is it necessary on this budget to know how much is being spent on cups for the product launch party? Probably not.

However, perhaps the product launch party team has their own budget. On this budget the detail of how much is being spent on cups would probably be relevant and important.

The smaller the scope of the budget, the more detailed it should be.

There could be another factor that determines how detailed your business budget should get — your strategic goals.

Perhaps you have identified three strategic goals for the year ahead, and one of those goals is to reduce operating expenses by 5%. If that is a goal, then naturally you will need to devote more attention to trimming back related expense lines. In that instance, you probably would want to get more detailed, because every penny might truly count.

One way you can cut down on too much detail in your budget is by using key performance indicators (KPIs). By determining what you need to measure, you can create dashboards and data visualization models that make it easier to see at a glance how your targets are doing. Certain budgeting software will automate this process for you, so you can spend less time administering and more time analyzing.

The amount of detail needed in your budget can also depend on how frequently you are budgeting and forecasting. To determine what frequency is right for you, download our free eBook, Finding Balance in Your Budget: How Frequently Should You Forecast?

True Sky’s corporate performance management software simplifies the planning, budgeting, and forecasting process so your business can focus on what truly matters. Contact us today to learn how it works. Call 1 855 878 3759 or visit www.truesky.com.

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