For some companies, budgets are soley completed for the sake of keeping the Board happy and for departments to justify or gain funding. After compiling a budget, it is often set aside and not referred to until the following year.
However, budgets are much more than spreadsheets, static numbers, and hopeful projections. For companies seeking to grow, budgets are a strategic tool used to set short and long-term goals. To fulfill its potential, a budget must be easy to create, change, revise, approve, and update. It should also promote collaboration with all of the company’s stakeholders.
A Reliable Root of Insight
Using the general ledger, you can combine the budget with the financial classifications needed, including the ongoing budget vs. the actuals and the transactional level.
Budgets are Valuable Tools
A properly utilized budget will:
- Look through historical data
- Gather input from the stakeholders
- Theorize what will happen over the next 12 months
- Calculate how those theories will affect the company’s finances
Budgets are Strategic
By regularly updating the budget and adjusting the numbers as they come in, it becomes a strategic tool for measuring the success of the company. Not only that, but it can help to avoid issues by indicating warning signs early enough that the company can pivot to a new direction and create a better strategic plan.
Another Form of Budgeting
Driver-based budgeting is when resources and activities are tied together with the financials in the budgeting process. What this means is that if a company is looking for a 20% increase in profits, the driver-based budget will identify the actual resources needed to deliver that boost in sales.
The big difference between driver-based budgeting and the traditional budget methods is that this budget method links to the actual physical resources needed to make the goals a reality.
Spreadsheets vs Intelligent Planning
Spreadsheets are an outdated form of budgeting. With the constant change of numbers and updates, any small change could through off the entire mathematical equation and result in a lot of wasted valuable time troubleshooting the issues.
Intelligent Planning platforms are much more efficient because they can handle these changes and make the necessary updates without disrupting everything. Saving you a lot of time, resources, and money. With it being activity-based, the flow of input through the financials are based on the logic and rules already established.
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