Every company needs a budget. Without one, you’ll face financial anarchy — wasted expenses and an eventual cash crunch. But are you getting the most out of your budgeting process?
The beginning of the year represents a great time to think about your company’s financial health. Add upgrading your budgeting process to your list of New Year’s resolutions. This will give you more control over your expenses and ultimately lead to a more successful business.
How can you make a significant upgrade in the way you set your budgets? Often, small strategic tweaks can have a major impact. With that in mind, here are five tips to help you improve the way you approach your company’s financial health:
Budgeting Tips for Your Organization’s Benefit!
Set Your Broader Goals First
What are the long-term goals for your organization? Answering this question will help you shape your budget. You’ll have a better view of the resources you need to accomplish your broader objectives.
Much of the budget process will involve setting aside funds for your day-to-day operations. However, don’t get trapped in the present. Setting aspirational targets will let you direct your discretionary funds as effectively as possible.
Involve Multiple Voices
You want as much data as possible as you create your budget. That means including a wide variety of perspectives. Get feedback from each part of your company and include multiple steps in the review process.
As part of this, make your budgeting procedure as transparent as possible. Obviously, not every employee will have access to every detail of the budget itself. But the process used to arrive at those decisions should be straightforward. This way, you’ll end up with a better result, and you can maximize buy-in once the budget is set.
Recognize Budget Risks
If everything unfolded exactly as you predicted, you would have no trouble sticking to a budget. Unfortunately, that rarely happens. As we’ve all learned over the last few years, major changes can come along to undermine your well-considered plans, whether it be rising inflation, economic turmoil, or a global pandemic.
Some of these are beyond your capacity to foresee. (After all, who could have projected the COVID outbreak?) That said, some risks are predictable. Identify potential factors that might impact your spending and make contingency plans as much as possible.
Develop a System to Track Progress
Setting a budget is just the first step. You also need to stick to the plan once it is set. That requires oversight and discipline.
Have a system in place to enforce your financial decisions. This includes a process for approving and tracking expenses. A real-time program of supervision will help you stay on track and let you respond to changing conditions.
Have Regular Reviews
As we’ve noted, circumstances can change quickly. You can’t lock into a budget at the start of the year and expect it to remain intact until December. Rather, you’ll need to make ongoing tweaks as you get additional data and as you identify new market opportunities.
Have a process to adjust to evolving conditions. Schedule regular budget reviews and make whatever changes are necessary to keep you competitive.
Looking to Find a Better Funding Structure?
On this front, it helps to have a flexible funding structure. With the right financing options in place, you can respond quickly to a changing market. A strong partner, like Frontline Funding, can give you the support you need to protect your cash flow, whatever challenges come your way.
Contact Frontline today to learn more.