Banishing the budgeting blues
At some point in the coming months business owners will have budgets on their mind. Some are beginning to wonder how they are going to achieve their most recent budget, some will be thinking ahead to their next budget. Some may even still be grappling with the third (or fourth of fifth) iteration of their budgets.
A business owner I was recently talking to was increasingly frustrated about the budget process in his company ; the process had grown more complex over the years and was taking too much time and resource to complete and was overly dependent on one individual.
It’s a familiar story.
So how do you avoid the budgeting blues? Here are a number of points to consider
– The budget should be seen in the context of the longer term planning for the business and not as a standalone annual chore. Keeping the ‘end in mind’ when working on the next 12 months’ budget will make it a more effective process and help guide your priorities and where you should put your resources
– The budget is a planned outcome of the future. It is not a simple forecast as it involves making and changing your plans to achieve your objectives. It should also be seen as realistic and achievable ; more challenging targets may be set above and beyond the budget expectation.
– Agree who needs to be part of the budgeting process and involve them from the start. Larger businesses will typically have a more complex departmental and/or divisional structure and it is important that the managers or heads are engaged with the process and are aligned with the results.
– Set clear expectations on how long the budget process should last and what resources need to be involved. Larger, more complex businesses may take more time and effort but guard against allowing yourself too long to complete the budget. It can be a good (or bad) example of Parkinson’s law where work expands to fill the time available. And do avoid extending the ‘budgeting’ process into the budget period.
– Assess systems requirements. For many companies, Excel will be sufficient but larger businesses may benefit from more bespoke budgeting software. One thing to consider when working with a number of individuals spread throughout the business is the use of collaborative tools such as Microsoft Team.
The budget is an important part of the business planning process but should not be seen as an end in itself and should have resources appropriate to the business, including the buy in from people charged with delivering the results.
At FD4, we have had extensive experience working with businesses of all sizes in helping them to improve their budgeting processes and banishing the blues. Please do get in touch if you would like to find out more.