Optimizing the corporate budgeting process can appear to be an overwhelming task, depending on the size and scope of the business in question. The problem many corporations face is continued reliance upon legacy or outdated budgeting processes, and in most cases taking stock and updating budgeting practices can have a very positive impact. Many tactics exist which can help business leaders streamline their budgeting process for a more efficient and accurate report. Let’s examine a few of the best below.
Never cut corners in your corporate budgeting process
While being in a hurry to meet deadlines and hit goals isn’t unfamiliar terrain for any business owner or manager, the corporate budgeting process is one thing that absolutely shouldn’t be rushed. If a department or sector is behind on their budgeting, this is a problem which managers should target and correct as quickly as possible – by doing so, headaches will be avoided down the line. Read our 4 tips to finish business budget planning on time.
When the corporate budgeting process is kept on time and regularly maintained by those responsible for it, it’ll be easier to see areas which need improvement during the quarter. This can include potentially unnecessary expenditures, which, if eliminated, can improve the bottom line.
Have realistic expectations and be comfortable with failure
Very few (if any) corporations are capable of perfectly hitting budget goals each and every period. Unfortunately, many budgeting departments consolidate all of their forecasts into a summarized report which is later presented to management – only to have management tell them that corporation-wide budgets have already been established and therefore the department will have to adjust and “deliver”.
This tends to make some departments inflate or adjust numbers unnecessarily. This is the kind of inefficiency which can be stopped immediately in its tracks by honesty from all departments, including management. Having a realistic and proper discussion about expectations and end results will not only make for a more accurate budget, it’ll likely end up saving money as well since budgets won’t be unnecessarily modified.
In the budgeting process, emotions should be set aside entirely – whether a department is succeeding or failing shouldn’t be a point of contention, but only one of fact. That’s the ultimate goal of budgeting after all, isn’t it? Honesty and realism are the best ways to reveal the facts necessary for a business to identify problem areas and thrive.
Streamline and introduce automation wherever possible
Businesses can be notoriously slow when it comes to adopting new processes – and the corporate budgeting process is no exception. Business leaders should ask themselves if they’re truly maximizing the tools they have at hand. For example, if a department manages their corporate budgeting process with spreadsheets (e.g., with Excel), it’s very likely that the spreadsheets in use are old templates which aren’t taking advantages of the current state of the software.
Hiring consultants to maximize usability and speed for budgeting and accounting tools like spreadsheets can have a dramatic impact on workflow. This means more time and money saved during the corporate budgeting process, and has the added benefit of more data – a more efficient budgeting process likely means that more details are being recorded, and thus business leaders will have a clearer view of where money is going and why.
Thoroughly review the technology being used – whether it’s spreadsheets as in the example we’ve chosen to use here, or something else. When making these considerations, it would be an appropriate time for managers to think about upgrades or other enhancements, perhaps to enterprise-tier systems if necessary.
Utilize driver-based metrics
Depending on the precise corporate environment, it’s possible that driver-based metrics could be very useful in order to improve the accuracy of the corporate budgeting process. Driver based metrics are deceptively simple in nature: the individual items on the budget, rather than counting paper clips and sticky notes, are based on the number of employees present in a department or sector.
Equipment and other expenditures are determined based on the number of employees rather than the individual items themselves – this tends to actually be more accurate and tends to remain more consistent from quarter to quarter. Additionally, the driver-based style of metric collection allows for business leaders to garner unique insights on where to focus and improve employee or overall business performance.
Review thoroughly and target areas to improve
The end of the corporate budgeting process is actually the most effective time to take stock of how the process itself went, rather than simply focusing on the results of the budgeting reports. What worked well? What could be improved? Which departments or sectors seemed to have the easiest time with their budgets, and which struggled? These are all the questions an attentive business manager or leader should be asking at the end of the next budgeting phase.
After assessing the budget process, the budget can then be scrutinized. Discussions about the results of the budget reports should be as detailed as possible – so it’s usually a good idea to schedule meetings as quickly as possible after they’re released. This will allow participants to still have everything fresh in their minds (particularly areas where improvement is necessary).
Speaking of improvements, this should be a major focus of any budget analysis meeting. Leaders should identify and discuss target areas which the budget indicates could be improved – which sectors are spending too much? Which departments could become more efficient with a modified cash flow? These and other considerations are paramount to an effective manager.
The corporate budgeting process doesn’t need to be a painful experience, although unfortunately in many enterprises it is. This can be avoided by implementing some of the things which we’ve discussed here today, but managers and leaders should be aware that making these kinds of changes, in reality, isn’t likely to happen overnight – but slow and steady improvements will eventually take root and, after several periods, can make a huge positive impact on overall company performance.