If you are a veteran to budgeting, you know it is about that time of year again to begin the process of reviewing the past year and planning for the new year. However, those who are masters of budgeting are preparing their fourth or fifth iteration of their annual budget—either viewing what remains of the current year, or if they are really advanced, they are rolling ahead another twelve months.
If you don’t find your company’s budget useful, or if you find your company’s budget proves obsolete during the year, it is time to implement an iterative and meaningful budget process that will give you an invaluable tool to measure and drive your business.
A budget that is useful in steering your business towards your intended goals is important, while a budget that significantly differs from your businesses’ actual performance and is left unattended isn’t, and often results in unintended financial consequences over the course of a year. Revisiting your budget at least quarterly is a great practice. One quarter is enough time to see a trend and to redirect resources to keep your business on track.
Having a nimble budgeting process is important while an overly complex and time consuming process isn’t. When the budgeting process is only visited annually, it is easy for the procedure to become slow and arduous. Moving to an iterative process will force the process to become streamlined and for the 80/20 rule to come into play: focus your budgeting process on the 20% of your business that results in 80% of your business’s performance. Yes, you can build bigger and better spreadsheets, but don’t get lost in the minutia. Remember the 80/20 rule.
Making sure everyone owns a piece of the budget pie is important, while a budget that only your accounting team sees isn’t. Not only does a more frequent budget review result in a more streamlined budgeting process, but being more streamlined will also necessitate greater accountability and ownership by budget contributors. In order for a budget to be used as a business steering tool, it must be highly visible and accessible to those entrusted with carrying out the business’s key objectives.
So, when gearing up again for another budget season, consider how you might make both your budgeting process and your budget more relevant in driving your business’s success.