Keeping a tight rein on finances sounds like a recipe for success but often it can actually be strangling the company.
It's finance school 101 to keep a close eye on what money is going in and out of any business. This helps it to stay afloat and ensures the organization can deliver on its expectations from customers. But has your grip on the budget become too tight?
Being overly restrictive with finances could be having a negative impact on the wider business, potentially even limiting its success.
Here's how your strict budget may be strangling your company:
1. It kills intuition
If a company has a finance team that are overly strict with the fiscal benchmarks, it is going to limit the value of those professionals who understand the industry and where the most profitable areas will be in the near future. This is something that companies should be looking to encourage in their staff as it's not something you can teach. Professionals that are able to use their own intuition for the good of the business are worth their weight in gold and can ensure you stay at the forefront of your industry. Changing the budget in a quarter or even a year means your company could very well be left behind while your competitors make the most of the shift.
2. It kills creativity
Companies that are consistently tied to their budget will struggle to bring out the true creative potential in their staff. You need finances to be at least a little negotiable if you want your workforce to feel empowered enough to drive innovation and new ideas to keep the company competitive. Brainstorms will be incredibly limited if professionals know there is no flexibility in the quarter's budget and they may sit on their ideas instead of sharing them.
3. It kills flexibility
It's not just creativity that is harmed by an inflexible budget, the organization itself needs to be able to adapt to changing circumstances. Whether it's a sudden loss of staff, a potential big contract, or a shift in the industry, companies need to be able to be flexible with their finances to survive the many bumps in the road. Being limited by a strict budget can sink a company as a result of not being able to make the most of sudden opportunities.
4. It kills collaboration
The finance team should be able to collaborate with other parts of the company and vice versa. Financial analysts are becoming a more integral part of boardrooms, allowing c-level executives to make decisions based on their expert advice. However, if budgets aren't negotiable, you may find that this collaboration grinds to a halt as professionals in the rest of the company may feel as though they're talking to a brick wall. Finance teams need to work alongside skilled staff in other departments to understand where the budget is best spent and where flexibility may be needed in the near future.
5. It kills morale
There are few things more demoralizing than having your fantastic idea benched because the budget has already been outlined for elsewhere. More and more professionals want to be at a company that is exciting to work for and where they feel valued in their role. If finances are written in stone then you may find your talent goes elsewhere, where they have the autonomy and support to put their ideas into action.
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