The importance of the budgeting, forecasting and planning process is the same across industries in that it allows a business to plan accurately for its fiscal year and deliver long term business development planning. Businesses able to forecast likely future expenses, establish more precise and realistic budgets have a greater chance of achieving ongoing profitability.
Here are our 10 top tips to improve your budgeting, forecasting and planning process to help meet your business’s financial goals.
Budget to your plan
Use your business plan to set a realistic budget based on actual revenue, rather than on opportunities that such spending might or might not lead to. This method forces you to consider the potential impact of spend on your business rather than dealing with it later and is helpful in addressing opportunities that weren’t included as part of the original budget.
Set clear goals
Without clear goals it’s difficult to accurately predict your organisation’s financial future. Avoid making random guesses by ensuring you have a thorough understanding of what you want to achieve. Your ability to accurately forecast your financial future is hampered when you aren’t clear on your organisational goals.
Include profit and cash flow goals
Ensure optimum accuracy of your budget by including metrics for profit and cash flow. These two bottom line measures could require very different actions to control and are critical in helping avoid missing financial goals so set realistic targets for both your cash and profit flow.
Your organisation is always changing so setting rigid budgets and forecasts isn’t very useful as you need to be able to factor in these changes and how they will affect your business. Be prepared to build flexibility into your process to allow for better accuracy and results.
Roll with it
Making use of rolling budgets encourages you to look beyond the end of the current year whilst taking into account unexpected changes that may happen. By plugging new data into your forecast on a regular basis rather than just once at the year’s outset, your organisation will be kept up to speed with everything that’s happening.
Be prepared for different scenarios
It’s impossible to be prepared for everything that may come your way, but keeping on top of industry and economic trends can help give you an idea of what could impact your organisation. Implementing a rolling forecast will help you with any changes, negative or positive.
Track your results
It’s important to not underestimate the importance of seemingly minor details and their potential impact to the financial health of your company. Everything needs to be accounted for when budgeting and forecasting for the next financial year. After a budget has been set, you should continue to look for potential scenarios, along with market trends and competitor activity until the business forecast is set.
Keep your teams involved
Budgeting and forecasting should be a team effort. Gaining valuable input from other departments helps provide you with the data you need to make accurate predictions and set realistic budgets. Your team can provide multiple viewpoints and thoughts of where your business is and ideas of where it could go.
With so many departments involved, it’s important to communicate with everyone regularly to help minimise any issues and ensure consistency between departmental plans and the organisation’s wider strategy.
Use the right software
Given the importance of the accuracy of your budgeting and forecasting cycle, the potential impact of change internally and externally and the time it takes, it can be difficult to keep on top of it all and minimise the risk of human error when you’re using Excel or other spreadsheet software.
Using budgeting and forecasting software ensures that everyone in your organisation is always working from the same up-to-date data and avoids the need to maintain version control and recalculation sequences.
If you would like to find out how we can help streamline your processes with a powerful budgeting and forecasting solution, get in touch. When your finance department has accurate and actionable data, your entire organisation is empowered to make better business decisions.