Budgeting is a fundamental financial management process in every company. But what to do to avoid falling into the trap of poorly thought-out strategies? How to reach further than most and effectively control expenses? Save and plan wisely – and with the right tools. In this article, we’ll look at the three main goals of business budgeting and the strategies that help you achieve them.
The 3 most important goals of budgeting in an enterprise. Why exactly are we doing this?
Future planning of company resources
One of the main purposes of budgeting is to enable you to plan for the future of your business. With a budget, you can determine how much money will be available over a given period and how it can be best used. This is important for all enterprises – both small and more extensive ones – that need to invest in the development of their business.
Looking into the future through budgeting also allows for reasonable forecasting of income and expenses related to the economic situation.
Effective expense control
Another important goal of budgeting is to control expenses. By carefully tracking what your company actually spends money on (and how much), you can identify unnecessary expenses. This very often translates into a change in the company’s financial strategy and an increase in the organization’s profitability.
Saving and investing?
Budgeting also allows you to save money for long-term goals and invest it effectively. Without a budget, it is difficult to consciously set aside funds for financial investments that enable the company’s development. With an appropriate budgeting strategy, you can determine, for example, what percentage of your income can be regularly allocated to savings and specific investments.
Remember: In recent months, when the „price” of money is very high, saving may not bring tangible results. To know and understand this, you need to plan and budget the flow of money in the organization.
Financial management strategies
Now that you know what your budgeting goals are, now it’s time to find out what you can do to achieve them. First of all, it is worth using certain financial management strategies. Below are some examples that work for our clients.
Accurate expense tracking
Keeping an inventory of expenses helps you understand what your company is really spending its money on. But tracking expenses in Excel, especially in a large company, is extremely time-consuming and tiring. At Incube, we help our clients overcome the limitations of manual budgeting with modern planning platforms. However, looking back is still not enough – it is also necessary to use predictive analytics.
Creating a realistic budget
The budget should be realistic and include all fixed expenses, such as office fees, accounting fees and loans. But what if expenses change very dynamically, just like the entire economic situation – not only within your company, but also in the entire market? Planning and budgeting in such conditions is a huge challenge for many organizations, but we know how to deal with it.
Three pillars are important: High Frequency Planning, High Accuracy and High Participation. Want to know more? We’ll be happy to tell you about this as part of our planning and budgeting consultations. For now, remember that you should use as much data as possible (internal, collected for years in Excel, and external, e.g. ERP or CRM systems). However, remember that none of the data sources mentioned can fully help you in the budgeting process. Such tools help analyze the current state, but they are not able to prepare a „what if” analysis.
Implementation of Beyond Budgeting in the organization
If you already know your company budgeting goals well and want to work with modern methods, take a look at Beyond Budgeting. This is a strategy that allows for greater flexibility, decentralization of decisions and increased trust in individual operational units. This is a method that perfectly adapts to market changes and will allow you to always be up to date. We write more about this in the article Can companies function without a budget?
If you need support in implementing modern solutions and unusual strategies – just let us know.