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How to maximize revenue in your business with a Smart Budget

How to maximize revenue in your business with a Smart Budget, Centage
Business woman standing in front of a blackboard with a financial chart

No business leader wants to deal with unpleasant surprises at the end of the year, such as missing revenue goals — or perhaps worse — missing the opportunity to exploit better-than-anticipated market conditions.

In my experience, the best way to monitor the progress of a business is through the budget. I view a budget as the initial plan for a set period of time. That plan addresses the central concerns of a business:

  • How much revenue do we think we’ll drive?
  • How much will it cost us to achieve that revenue goal?
  • What’s the seasonality of our business? When are the ups and downs as it relates to our revenue and expenses?

Budgets also contain critical KPIs; targets for top-line revenue, bottom line expenses, as well as efficiency, cost of sales, average selling points and so on. In other words, when business leaders create a budget for a year, what they’re really doing is creating a business plan and articulating how the year will unfold in terms of top-line revenue, bottom line margins and profitability.

However, change is a constant in life, and budgets are no exception. As businesses enter a new year and begin to execute against that plan, things may very well unfold differently than anticipated. You may find that your company is ahead of — or behind — your revenue forecast, or spending more or less money than you thought you would. In such cases, you will need to make adjustments to your plan to respond to market conditions.

In order to really manage a business well, you will need business budgeting and planning software that allows you to factor in your actuals year-to-date as you progress through the year. So if you’ve forecasted a particular revenue goal for January, you’ll want to monitor how your company is performing against that goal, and how your expenses are running against that goal. You’ll need to monitor those KPIs in January, and as you enter into February, you’ll want to know exactly what the variances were. At some point, you may need to change your plan, which in turn, changes the budget. This is where a Smart Budget is useful.

A Smart Budget automatically processes all inputs according to your company’s unique business structure and automatically updates all outputs, such as your P&L, balance sheet or cash flow statement.

As a result, you can manage your business budget — and your plan — in a real-time, sophisticated way. And because it’s automated and up-to-date, you can also look at as much detail as you need, as frequently as you need, to and make smart decisions as the year progresses. Since it’s nearly impossible to get all of your assumptions right in the beginning of the year, adjustments are always necessary.

Being able to see those adjustments ahead of time is where Smart Budgets make a difference in financial forecasting. They allow you to forecast your business, see your variances, determine quickly if you’re on pace or where your assumptions might be a little off. More than that, they allow you to make adjustments and immediately see how they might affect the remaining year, and determine whether you need to make further decisions to stay on course. For instance, if you’re ahead of plan, you may decide to boost inventory. If you’re behind plan, you may need to look at headcount or other ways to reduce expenses.

So in the end, when we talk about budgets, we’re really talking about the business’s plan for the year. To manage a business successfully, executives need to be able to access, change and discover each nuance of a performance plan, so that the decisions and adjustments can be made swiftly and with data-backed accuracy. Smart Budgets give you the tools to do just that.

Centage Corporation’s Budget Maestro™ provides businesses of every description with a family of Smart Budget software solutions 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.