Your budgets and forecasts are part of an essential process to ensure the smooth running of your business – so it is important that you get this process right, no matter how big or small your organisation. However, these are also two processes that many businesses fail to execute accurately or efficiently.
Here’s our 6 top tips to improve your budgeting, forecasting and planning to help meet your financial business goals.
Set clear goals
Without clear goals, it puts you in a hard position to accurately predict the future for your business. Mistakes are made when there are no clear plans or goals in place to understand what a business hopes to achieve in a given year. With targets or achievements in sight, it’s easier to plan what’s needed and where the business should be heading financially.
This is probably the most important factor. Certain business ideals and plans change depending on circumstances, therefore having a strict or static budget and forecast may be more harmful than good and could lead to problems. Try to build flexibility into your budget to allow for sudden changes or necessities that may appear during the year. Within your process include a review at the end of each quarter to see where you stand financially which will improve the overall accuracy and lead to better decision making.
It’s completely impossible to plan for everything that is going to happen throughout a year. Keeping up with industry trends, equipment failure, staff changes – you name it, it may happen. If you implement a rolling forecast for your business, it will be easier to keep on top of sudden changes. At each quarter update your financial forecasts for the following quarter by using actual quarterly financial data, keep this rolling and updating it as you go.
Manage like any other project
Your budgets and forecasts should be managed like any other projects – with due care and attention and with respect. Start from the beginning and learn where you are and what you want to achieve. Plan from there and set targets. Track your status and report continually and at the end of the year you will see what you’ve accomplished, how you’ve achieved it and your financial positions, ready for the next year ahead.
Wherever possible, try to simplify the process for everyone involved. Before you start rolling out a budget and forecast, try to find ways to make it an easier process to manage. Use technology that will help accuracy and efficiency and formulas for quickness and effort – various ways to reduce the chance of errors and manual processes. Automation can be key to efficiency. Take time to make sure it’s correct – getting it right the first time will eliminate errors later on. Once you’ve got a good and strong budget, all you’ll need to do going forward is tweak and update, a framework for all your future budgets.
Keep teams involved
Budgets and forecasts should be a team effort. Try to communicate and keep different teams and departments involved in the process to help provide realistic and predictable budgets. Teams can provide a different viewpoint that you may not have realised, if you involve them, which could help with future planning and changes that may need to be made.
If you’re looking to streamline your budgeting and forecast process or you’d like advice on how to go about it for your own business, we’d be happy to help. Feel free to get in touch. Start the new year on the right track.