The financial planning process is a critical one that many companies compress into as little time as possible. Some companies are able to cram all their budgeting in a mere 25 day cycle. Others take much longer.
Is a shorter planning cycle better than a long one? Limiting the time to get your business’s financial plan for the coming year laid out may have advantages. But that doesn’t mean that starting your planning early doesn’t have advantages as well.
Getting Your Goals in Order
Your budget is a means of aligning your anticipated income with your operational costs and what is needed to achieve the company’s short- and long-term goals. Your financial strategy becomes the roadmap to achieving those goals.
When an organization begins its financial planning process early, it gives planning participants more time to consider and better align their budget requests with where the company wants to be. For instance, IT may need to consider new server architecture to support the organization’s goal of expanding further into the use of IoT devices. Starting early gives IT stakeholders time to closely evaluate vendors and solutions, as well as where staff may need training in new skills.
Keeps the Current Budget Top of Mind
Typically, annual budget planning happens in a very short window, but working with the budget is something that is a daily concern. Unless stakeholders are taking careful notes on when their budget line items exceed their projections, it may be difficult to pinpoint what happened.
Starting the financial planning process early keeps the current budget at the forefront as well, including specific budget areas. When the current budget is being worked with and evaluated more often, it’s easier for budget owners to connect things that might have caused a shift in spending with their line items. If budgets are only done during a short window of time, the details of something that happened 10 months before might be lost.
Early Means Time to Get Creative
When it comes to evaluating options, you need time on your side. It’s worth the extra few days or weeks of research and consideration to ensure that new and existing vendors are the right choice and that new products and services get off on the right foot.
Hurrying through the financial planning process may mean making assumptions based on only partial information. It may also lock you in on a path to your goals that doesn’t meet your company’s needs or standards. If your planning numbers are too far off, you may find yourself with either a budget overrun or having to pull back on your goals.
Taking the time to evaluate options and have the right discussions around goals and tactics can lead to better outcomes. Plus, working early with partners and vendors may allow you to negotiate special pricing through the sales cycle.
Not every organization has the luxury to begin financial planning early. Those who do, however, can experiences benefits that are reflected in business outcomes and your bottom line.
Small to mid-market organizations rely on Centage Corporation’s Maestro Suite, which includes Budget Maestro™ to help them keep track of and manage their cash flow. Budget Maestro improves the efficiency and effectiveness of business budgeting and planning, financial forecasting, financial consolidation, and financial reporting processes. For more information, take a tour of Budget Maestro, contact Centage, or call 800-366-5111 now.