Budgeting season is here. For many CFOs and budget managers, the next few months will be an endless stream of data, requests and revisions.
But what happens if after all the time, energy and resources devoted to it, the budget still doesn’t quite stack up?
You likely already know the answer.
The worst part? Discrepancies might not even be discovered until months later, well into the first quarter. By then, it can be too late to fix without starting fresh or wasting even more time.
These issues happen more often than you’d probably like to believe.
Here’s the good news: there are best practices, along with methods and systems, that your organization can use to improve your budgeting processes and results.
‘Smart’ budgeting means embracing the power of technology and available financial intelligence. It allows you to create a budgeting and forecasting process that is more efficient with shared ownership that reduces risk and uncertainty.
In this post I want to share some of the biggest reasons why smart budgeting can help your organization rethink its approach to the traditional budgeting process.
Traditional budgeting hits speed bumps most often when ownership of a task is hazy. Most budget managers have experienced this—having to reconcile data between spreadsheets from different sources, and then manually enter information.
This method can be a recipe for disaster. A better solution? Create a system where every party has ownership and responsibility for their part of the budget and data gets consolidated automatically.
Knowing Actuals and Cash Flow
Many businesses fail not because they’re bad ideas, but because they don’t have a good handle on cash flow. Real-time cash flow is a vital piece of information that can get swallowed by all the other numbers, or worse, left out of reporting entirely.
Knowing current performance and cash flow is crucial. Otherwise, it becomes increasingly difficult to feel confident in making big decisions that involve significant cash outlays. Holding off on something that can improve the organization, or conversely, spending when cash is limited can cause potential problems as well.
Today’s business environment is dynamic. Management teams and key decision makers need to spot both challenges and opportunities and act on them quickly. Making these quick decisions is far more challenging without on-demand access to actual data.
One significant benefit of a smart budgeting system is it offers real-time reporting at the click of a button. Decision makers can see a snapshot of organizational health at a moment’s notice.
A pitfall of budgeting is finding the right amount of detail. Too much, and key decision makers will get mired in data that doesn’t drive performance. Too little, and they could be missing information behind those key drivers that impact the business.
Being able to highlight key performance indicators in easy-to-read dashboards can make all the difference. The management team can see what data matters now and compare it to historical numbers and future projections. The ability to see the right data at the right time is essential to confidently, successfully setting organizational strategy for the future.
It’s difficult to create a good forecast if the data behind it is shaky or out of date. Today, organizations look to implement rolling forecasts (among others) as a key component of their budgeting cycle.
Good financial forecasts can help your organization project production and staffing, reduce spending and plan for the future. They can also identify potential needs down the road and help guide organizational strategy. So it’s crucial to make your system both more effective and efficient.
Having a very clear understanding of your organization’s overall health is incredibly important for strategic decision making. It’s why taking control of your budget is so crucial, and with a smart budget approach, it’s easier now than ever before.
To learn about more ways to improve your budgeting and forecasting processes, sign up for our Budgeting & Forecasting: Best Practices & Pitfalls webinar. In it, you’ll learn how to discover barriers to success and find opportunities to improve your processes.
Businesses of every description rely on the Budget Maestro™ family of software solutions by Centage Corporation to improve the efficiency and effectiveness of their business budgeting and planning, financial forecasting, financial consolidation and reporting processes. For more information, take a tour of Budget Maestro, contact Centage, or call 800-366-5111 now.