Few companies open their doors with the intent of staying the same size, or doing the same thing, for the life of the organization. Even the smallest business has a vision for the future of the company.
Companies also have a finite number of resources they can apply to running and growing the organization. Budgeting is a critical part of making sure you have what you need to operate and that you intelligently allocate funds for growth.
Unfortunately, some companies lose the connection between planning and budgeting along the way. While they understand that the two are intertwined, it isn’t uncommon for a company’s budget to be set up at odds with its strategy. Aligning planning and budget are crucial to achieving your company’s goals.
Why Planning and Budget Should be Aligned
Your strategic plan is the vision of where you want your company to go. It’s aspirational, but not unrealistic. A well thought out plan will tell you where you’re going and lay the groundwork for how you’ll get there.
Your business budget should guide you in setting up your resources to execute on that vision. It ensures that the things you need – personnel, investments, equipment, and so forth – are available to get you to wherever you plan on going.
It’s easy to get caught up during the budget process in ensuring that money is allocated for operations and smaller projects that don’t feed into the larger plan. It’s also easy to set a plan in place that tries to do everything at once and falls short because of lack of resources. Ensuring these two are aligned is how an organization achieves its vision.
Setting Your Budget to Support Your Corporate Strategy
Getting your budget to support your corporate vision can be easier said than done. There are three keys to getting both of these important business functions moving together in the same direction.
Keep Your Eye on the Ball
Many business plans span over much more than 12 months. And many budgets look at a 12-month period. While there are several ways to adjust this (including rolling budgets, discussed below), those organizations that keep to an annual budget need to include these long-term plans into the budgeting process early, before all funds are allocated to operational endeavors and shorter-term projects that don’t move the company toward its end goal.
For some organizations, the team that sets the strategic plan is not the same group that defines the nitty gritty details of the budget. It’s impossible for the finance team to support the larger business plan if they don’t know what it is. Executives need to communicate the business’s goals to the directors and managers creating the budgets so that resources are appropriately applied to the right strategic projects at the right time.
Review, Measure, and Adjust
Today’s business world changes, rapidly. Not only do organizations need to measure their strategic progress against their defined goals, but they need to ensure that those same plans aren’t out pacing the actual budget. A dip in sales, an issue with suppliers, any number of problems can throw a wrench into the most well laid plans. A rolling budget, as opposed to an annual one, can help organizations adjust quickly to meet new business demands while still staying on the planned path. By looking at budgets monthly or quarterly, deviations from the original budget can be made quickly, keeping the organization agile while still reaching its goals.
Planning and budgeting are both important to the stability and growth of a company. But they don’t exist in a vacuum. These two pieces must be closely aligned and reviewed both separately and together for a company to successfully reach the next level in its growth.
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 reporting processes. For more information, take a tour of Budget Maestro, contact Centage, or call 800-366-5111 now.