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Here are some budgeting tips from My Best CFO:
Tip #1: Consider budgeting as a positive activity that provides you with a helpful business tool
The budget should not be a tool for managing every penny spent. Treat it as a guide that helps you make better spending decisions and identify areas for improvement.
It is essential to maintain the right attitude when budgeting. If you see budget as a hurdle from the very beginning, your chances of creating a good budget will be very close to zero.
Tip #2: Be aware of pending changes in regulations and your industry standards
When budgeting it is essential to collect and understand risks and opportunities related to your company and its industry. For example, new tax laws, changes in industry standards, changes in customs regulations and etc.
Certainly, your company is not the same to the other companies in your industry, and if you can identify areas where your results are significantly different and reasons for those differences, you will make better decisions about spending.
Tip #3: Develop your budget based on past results and future projections
A budget developed solely towards a targeted number will not help you in effective management of your company.
Analyze your past performance, identify fixed and inevitable costs, take a look at costs that fluctuated over time and determine what caused those fluctuations.
Your past performance information and forecast of future behavior will help you create realistic budget.
Tip #4: Factor in some level of the unknown
It is very common that companies encounter some unexpected elements of their projects. If during budgeting of a project we knew exactly how everything would happen, it wouldn’t be a project.
Therefore be conservative and factor in some contingencies into your budget.
Tip #5: The more detailed your budget is, the more effective it will be
Certainly, it doesn’t make sense to have a separate line item for each transfer you make or check you write, but the more detailed you can get, the better.
When it comes to analysis why some line items were out of whack compared to the budget, this can help to answer your questions.
Tip #6: Share the budget within your company
Company’s budget should not be kept as a secret. While most of financial information is and should be kept to a limited group, according to statistics companies state that increasing budgetary awareness leads to greater transparency, more feedback and beneficial communication.
Meeting budgetary targets can be an incentive program for employees.
My Best CFO Team has excellent budgeting specialists and we are always happy to help.
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