Budgeting is easy. It’s everything else that makes it difficult!
Four Critical Elements of Budgeting:
- The System: Your process of budgeting is called a system. Does your system produce cooperation, sharing, communication and an honest, realistic budget that people use to make decisions? Who are the participants involved in the process and who is accountable for each line item? What is the timeframe? Typically, it’s the next fiscal year, but in some cases, you might be working on shorter or longer term budgets.
- The Groundwork: In its simplest terms, a budget identifies a profit goal and then lists expenses incurred to meet that goal. Your budget requirements should include realistic assumptions and models, defined relationships among revenues and expenses and “what if calculations” to help you prepare for real world situations that may occur.
- The Environment: The environment is an overlooked piece of every flawed budgeting process. The environment is your culture. Corporate culture has a huge impact on the quality of the budget. The culture must incorporate accountability, controllability, communications, continuous improvement, empowerment, training and trust.
- The Mechanism for Change: While it’s important to be disciplined about staying within your budget parameters, you should also plan o being flexible and adaptive to changes. Budgeting has become a 365 day per year management process. The budget must be designed with agility in mind. Have a process in place that allows you to review your budget on a monthly basis and make changes as needed. Keep in mind that your product or service is a line item for someone else’s budget. What will it take to replace a key customer?
The CFO Role: Cheerleader of the budgeting process!
Hardesty delivers solutions for companies with agreed-upon objectives, timelines and scheduled feedback mechanisms to assure client satisfaction. Companies turn to Hardesty for budgeting solutions.
We can deliver immediate results. Learn more about our solutions at www.hardestyllc.com.