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7 steps to successful budgeting

base post preview Successful budgeting

 

In many companies, budgeting is something that is done on a spreadsheet by management and finance. This gives rise to  annual panic and statements such a “that’s not in the budget” or “that’s not how it was planned”.

Keeping the following aspects in mind can make budgeting a transparent and helpful process:

1. Know your business

Every company is unique: whether it is the organisational structure, management principles or the type of customers. Individual characteristics often imply that you can’t use textbook budget planning in the form of financial plans, planned costs or balance sheets. Before you introduce budget planning, consider the following questions:

 

  • What departments do I have?
  • Are there other management structures within these departments, such as group leaders?
  • Who is responsible for the budgets?
  • What are the product categories on the basis of which you want to report? You can check the income statement or economic evaluation to separate larger cost items more precisely. Be aware, however, that the separation of cost items on the basis of suppliers, commodity groups or similar must be simple.
  • Are there people who work in or are responsible for more than one department, making it difficult to assign them a fixed cost center?

2. Involve your managers

The psychological effect that budgets have on managers should not be underestimated: if people plan their own budgets, you may find that they take more responsibility for sticking to them. Make sure, however, that you give an indication of the budget right at the beginning, so that people don’t start wishful thinking resulting in disappointment about a flat 20% cut (hereby you achieve exactly the opposite).

3. Plan project budgets

When implementing cross-departmental projects and initiatives, sooner or later you need to ask the question, “on which budget does this go?” Decide whether the added value of a project has such an immense impact on the company’s success that posting it to an overarching cost center is not more appropriate than burdening the budgets of individual departments.

4. Align budget planning with your personnel planning

When planning project budgets without coordinating with the involved departments, you run the risk of having planned the respective costs for e.g. software and external consulting services, but not taking into account that you do not have people to carry out the projects.

5. Budget to increase employee loyalty

In recent years, people-related budgets are increasingly on the rise. This is where management plans specific budgets for training, any hardware and software requests, and much more that are available to each employee. Pay special attention here that the respective people are aware of this. Define what costs are being taken over and plan it either to a separate company-wide cost center or to the personnel cost center. This aspect seems simple, but keeping it transparent for the individual employee often turns out to be a mammoth task.

6. Keep an eye on your budget even during the year

The budget should not, as mentioned at the beginning, be planned once a year and then be placed in the drawer until the quarterly or year-end closing. Train your employees and managers to keep the budget in mind when making purchases or to contact the responsible people. Only a budget that is consulted for everyday purchasing decisions is a budget that does not lead to unpleasant surprises at the end of the year.

7. Use the right tool

Introduce a tool that supports you in the topic of budgeting and addresses each employee respectively, as budget decisions are made before the purchase. If this has already been done, you hardly have a chance to turn it back without increased effort. Are you curious? With Hivebuy we support you from planning to closing to have an overview of your budget, to give your employees a new perspective on costs and to speed up your accounting by a multiple.

 

Any more questions?

Book a personal appointment and we can clarify questions and advise you on the basis of a product presentation while guiding you through all the benefits.

Jaime Aguirre Garrido-Lestache

VP Sales

[email protected]

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