Use technology to improve data accuracy
One of the most common budgetary problems CFOs and finance teams have to contend with is incorrect and unreliable data. This can be particularly prevalent in larger businesses that have to keep track of spending and resource requirements in various departments, from HR and recruitment to product research and development.
When you're collecting a range of information from various sources within the company, it's easy for mistakes and inaccuracies to creep in, especially if you're still heavily reliant on manual processes. Research has shown that 88% of spreadsheets contain errors, and when you're dealing with something as important as your organization's budget, even the smallest oversight can have significant consequences.
Modern budgeting tools and software can minimize the risk of human error through the automated collection and management of data. You can also use technology to achieve benefits such as synchronization between key financial functions - invoicing and payroll, for example - to help you produce accurate and timely reports.
Regularly revisit your budget
Creating a budget shouldn't be seen as a one-off activity that only happens once every 12 months and is ignored for the rest of the financial year. It's important to revist your budget at regular intervals throughout the year to make sure it's relevant and up to date.
Various factors need to be taken into account to ensure your budget is giving an accurate reflection of your current position, including unexpected developments in your accounts payable and receivable - such as a high-paying client canceling their contract - and market trends that will have a tangible impact on your finances.
Looking at budgeting as an ongoing, fluid process will also help you tackle another problem commonly associated with this task: not having enough time to do it properly.
Trying to complete your budget in a rush at the end of a fiscal year will make it feel time-consuming and onerous, as well as raising the risk of mistakes being made. By taking the opposite approach and coming back to it frequently throughout the year, you can distribute the workload more evenly and ease pressure on your team.
Be prepared to make changes
One common flaw with business budgeting - and an issue that could affect your level of control over the process - is a reluctance to deviate from how things have been done in the past.
It's easy to fall into the habit of replicating budgets from past years and only making minimal changes, particularly when you're facing time and resource constraints. However, this can have several drawbacks, including encouraging departments to overspend and use budget they might not need towards the end of a financial year, to ensure they receive the same amount again in the following period.
This is another reason why it's important to carry out regular checks and audits of departmental expenditure at different times in the year, so you can build an accurate picture of the resources required in different areas of the business and how they're being put to use.
It can also be beneficial to work closely with stakeholders across the company when creating your budgets. This will help you gain a clearer idea of needs across the organization, and will also give departmental leads and managers a better understanding of where you stand, financially speaking, and your current aims and priorities.
Link your budget to company goals
Budgeting needs to take place in the context of the company's plans for growth and what it's hoping to achieve in the coming quarter, financial year and beyond. Ensuring there's a clear connection between your budget and organizational goals will help improve control and transparency in the process by providing structure and an end result to work towards.
If you have some crucial product launches on the horizon, for example, the budget will need to reflect this by ensuring ample resources are available for everything from market research and product marketing to procurement and supply chain management.
Focusing on the business' key objectives will enable you to make your budgets more specific and relevant. You could even work alongside particular departments and managers to break budgetary allocations down to specific deliverables and items that are crucial to performance.
In the long term, this level of consistency between the finance department, the budgeting process and the rest of the company will lead to valuable results.
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