This article focuses on best practices to improve your budget process.
Think about all of the time and energy your company allocates to budgeting. Managers often scramble to collect financial data from multiple sources in consistent formats. Rather than aiding the process as they should, differing technology tools only add to the manual process. I feel incredibly overwhelmed just thinking about it, but these 12 best practices have helped immensely. This article will explore 12 best practices anyone can implement to improve the quality of his/her budget to stay on track now and into the future.
Each of these points fall into the following three categories: strategize, budget, and operate. As mentioned in BroadPoint’s white paper case study, “your strategic plan must drive your budget, and your budget must be allocated among your strategic initiatives.” In terms of the budget, most organizations still use manual spreadsheets and practices that make creating a budget manual, prone to error and frustrating for everyone involved. For operations, many companies have little advanced warnings for potential conflicts/issues and spend their time in a reactionary mode.
Here are the 12 best practices:
1) Keep your eye on the organizational goals. Strategic planning is tough. According to the Concord Leadership Group, nearly 1 in 3 organizations don’t do it. Of those who say they do it, 19% don’t even write their plan down. It’s extremely important that companies show their staff how organizational goals actually link to initiatives and set “SMART” goals to track progress. SMART goals stand for goals that are specific, measurable, assignable, realistic, and time-related. This process is crucial if your company has undergone significant transition(s) recently or is anticipating change.
2) Get the right people involved. Do you have a plan to meet your goals? You need the right decision makers who can develop a plan and figure out how to meet the strategic goals or budget. Your finance or operations teams should be connected to the executive strategic planning. When they work together, merge their priorities and understand their roles within the bigger plan, your company is on the right track. Also, apply this to your company’s planning process of all divisions, departments, funds, or project managers.
3) Meet in the middle. If your company can’t meet strategic goals with their planned budget or there’s a consistent mismatch between top-down strategy and bottom-up team member input, these are signs that your company should meet in the middle. Build and enforce your budget alignment through a central database that involves everyone in the company, and realign your operational plans to reach your strategic goals.
“Effective budgeting cuts across the whole organization,” said Nils Rasmussen, CEO of Solver Inc. “A database-driven process is the efficient way to bring everyone together. It’s extremely difficult to accomplish with a manual budget process.”
4) Align technology to the strategy. You may need to arrange financial and other solutions to include and report on vital information related to your strategy. This could mean reviewing your reporting or financial segmentation or revamping systems so they provide critical data to stakeholders. When BroadPoint, Inc. asked their attendees how well their budget connects to their strategic initiatives,their results showed that only 27% identified as being nearly or completely aligned.
5) Use the right tools for the job. Are you punching in your budget data manually? If you are working toward a financial goal or you are working with limited money, finding the right tool to budget will benefit you at both a personal and organizational level. Consider integrated tools made to streamline, simplify and automate your budgeting. Your company will benefit from a common budgeting tool that works with existing systems to combine all financial data and tasks in one space.
6) Standardize & fortify budget templates. Build standard templates and lock any changes. Connect each template to a data source and control any modifications. This brings everyone literally onto the same page.
7) Monitor workflow and approvals. Create a collaborative space that integrates all information. This type of workflow truly streamlines the budget process. If your company values transparency, this approach is ideal because the timeline tracks managers’ progress and holds everyone in the company accountable.
8) Lock down your budget. Implement process and system controls to keep your final budget away from unauthorized personnel. For example, only allow an adopted budget to change when the Board authorizes a revision. Require other changes to pass through as another budget scenario such as revision or forecast.
9) Implement an “early warning” system. Set up your system to reveal leading indicators and to give stakeholders year-to-date actuals versus budget in real time and in a way they can understand. You can do this by configuring automated alerts to monitor accounts, departments, projects or balances on a daily or weekly basis.
10) Roll your forecast forward. How often are you analyzing and forecasting? Do you have the benefit of a dashboard to reveal budget to actual results? Accurate forecasting is a critical component of better budgeting. If you’re depending on old financial data to make critical business decisions, it’s time to bring your systems and processes up to speed. It is easier to adjust your forecasts based on reality when you have good, clean data.
11) Start planning early. Flexible, year-round planning lets you reexamine assumptions, change to match actual market conditions and prevent the “Big Bang” year-end budget approach. Planning ahead allows companies to use the data to automate their estimates for future periods or in development of the next fiscal year budget.
12) Build one source of the truth. Having a centralized data source is crucial to a successful budget. By building an integrated platform that continuously monitors your company’s budget, you protect against the worst mistakes of the budget process. Budget Managers can have one course for accurate, real-time data.
These tips can improve your budgeting process and save your company time and energy. The key is aligning your budget with a broader organizational strategy and utilizing the right solution to keep your team on track. BroadPoint and Solver would be happy to answer any questions and generally review solutions for collaborative, streamlined decision-making capabilities. BroadPoint offers integrated AMS, CRM, ERP and BI solutions, in the cloud or on-premise. Solver offers Excel and Web budgeting stand-alone solutions or as part of the comprehensive suite of BI360 modules.
Solver enables world-class decisions with BI360, a leading web-based CPM suite made up of budgeting, reporting, dashboards, and data warehousing, delivered through a web portal. Solver is reinventing CPM with its next generation solution. BI360 empowers business users with modern features including innovative use of Excel in the model design process. If you’re interested in learning more, our team is excited to hear about your organizational needs and goals.