For every company, from smaller companies to Fortune 500 corporations, budgeting is a necessary evil. Everyone dreads the process, but knows that it needs to be done. Whether you budget to meet reporting requirements to the bank or government or to keep your board up-to-date, the process must be completed, and completed on time. And since most companies only go through the budgeting process once every year, it can be easy to forget the pains of the past. Capturing those pains and translating them into ‘do betters’ or best practices can help to make next year’s cycle more effective and less strenuous.
Here are a couple of things that we have found can help make a difference.
Templates created for the user. Make sure the right people are involved in input and make sure that templates are created with the end user in mind to ensure a greater overall usability and the best end results. If spreadsheets are too big or contain too much information, the end user is likely to get lost, resulting in errors. Reduce the amount of data presented to the contributor to the bare minimum required to get the job done.
Consider zero based budgeting. When budgeting, many people simply take last year’s figures and apply an ‘inflation factor’ to them. Over time, the numbers keep getting larger and larger whether or not they logically need to increase. With zero based budgeting, you have users start from the ground up (with no data from previous budgets). By not providing prior figures you force contributors to really think about what they are going to spend and why.
Time is money. Give yourself (and your users) enough time to complete the budget. Budgeting takes time, but the more time you give, the more likely you are to end up with accurate numbers that reflect actual analysis and thought, rather than just data input. Also leave yourself time to analyze the end result.
Constant review and refinement. Budgeting can’t exist in stasis. You should continuously review the process and make appropriate changes when required. As things within your organization change, so too should your budgeting process.
Increase the frequency. The debate surrounding annual versus rolling forecasts continues to take place. Although there are merits to both frequencies, we believe that the more often you examine your budget, the less time it takes in the long-run. Budgeting on a regular basis, rather than just once a year, gives you the ability to identify both pros and cons with the current numbers and to make alterations as needed. This also helps to reduce those costly surprises at year-end.
There are many reasons an organization budgets – financial predictability, to understand business drivers, to manage performance – and each reason is important. To get a clear and accurate picture, following these budgeting best practices can really help.
At True Sky, we understand how tedious and tiresome budgeting can be – even when you’re following budgeting best practices – but somebody’s got to do it, right? We can make it easier. Find out how by calling us today at 1-855-878-3759.