In times of business rapid growth and up-scaling there are many things to consider. In order to successfully achieve business growth, there must be a strong element of fiscal planning to help facilitate this. This process includes monitoring, compiling, company’s revenue, spending, debt, capital forecasts for the financial year and annual budget. This is a major operational task that takes place once a year but can be more complicated and last longer than expected.
For senior finance managers and C-suite management this process can be extremely strenuous, having to coordinate people and manage approvals for the budgeting process. This budgeting process require decision makers to define financial objectives, analyse business performance and make adjustments to company budgets.
Establishing a budget allows a business to have a guide for their revenue and expense choices, resources and direct the long-term financial goals and fiscal planning. With budgeting being such an important part of any business, we explore some of the most important problems face when preparing your business for your own fiscal plan.
Gathering data, excel spreadsheets and documents from disparate sources (sometimes many different versions of the same document) can cause a host of problems. Many businesses still rely on manual data entry methods with around 90% of invoices still being processed manually. When a CFO tries to centralise all this information it can often turn out to be inaccurate. An inaccurate budget can have extremely negative affects resulting in business operations becoming skewed and sometimes ineffective.
The budgeting document must be able to be used by all key managers across the company. This budgeting document should be easy to access, use and in a standardised format. However, the spreadsheets passed along may not allow for labelling of different budget contributors. This can result in inaccurate responses. In addition to this, the lack of structure can result in incorrect calculations due to management not having the flexibility to report what they need to.
As mentioned above senior management often underestimate the sheer time and effort a fiscal budget requires. With the various different areas data can be taken from, the multiple spreadsheets and the process of compiling all of this information it is safe to say that budgeting can be an extremely long process.
With the various different layers required to successfully create a budget the complexity of the process can often be a major stumbling block for a business. With many different members of senior management juggling different deadlines there can often be sudden changes to schedules, as well as the added difficulty of collecting data from so many different sources. There can often be many revised figures, questions asked and confusion on the budgeting process. Simplicity is the key to ensuring correct budgeting.
The cross communication required for setting up a budget can be extremely complex and time-consuming. In order to get an accurate budget multiple stakeholders have to be involved in the processes, resulting in going back and forth and questions being asked. This can often cause communication issues as various managers have to work under different schedules resulting in the budgeting not being completely aligned or not having all the data at the right time.
Keeping your budget monitored throughout the year allows you to adjust your business operations and strategies accordingly. One major hindrance to budgeting is the technology, or lack thereof, that companies utilise in order to keep their budgets updated and optimised. Many businesses have not undertaken the major labour needed to merge actuals and budgets or implemented complementary technology to optimise the budgeting process.
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