You might be surprised at how easy it is to improve one of the most challenging parts of doing business when you have the right tools.
For many owners of small to midsize businesses (SMBs), the challenge of forecasting, adhering to, and auditing a budget is just too much to handle. According to data from Clutch, only 50% of small businesses created an “official, formally documented” budget in 2020.
That same year, Proceedings of the National Academy of Sciences (PNAS) announced in a report that 43% of small businesses had temporarily closed and overall employment had dropped by 39% since January, with most of those closures citing budgetary concerns as a result of the COVID-19 pandemic as the cause.
Although there will (hopefully) be nothing quite like the COVID-19 pandemic again in our lifetime, this drastic example highlights the importance of maintaining an optimized budget. And that’s where technology comes in.
What does budget planning really mean, and how can it benefit your company?
In the past, businesses used to be able to scrape by with a budget that merely forecasted future revenues and compared them to costs. Maybe they didn’t have a budget at all. But in today’s economy, that doesn’t cut it anymore, due to sudden supply shocks, inflation, and other hard-to-predict financial challenges.
In order to maintain profitability, as well as competitiveness, your business’s budget planning should include a multi-layered analysis of every department.
The sheer amount of time this can take often leaves businesses faced with a choice between the following two options: Outsource the job to a team of budget experts or do it in house by partnering with a software vendor to acquire budgeting software.
Five tips for optimizing your business’s annual budget planning
There are countless ways to improve a business’s budgeting strategies, and they all vary in usefulness from one company to the next. That said, these five tips have shown themselves to provide evergreen value regardless of industry-specific requirements.
1. Consider using a budgeting template to help organize revenues and expenses
Business budget templates are a helpful tool when it comes to creating your first budget. In fact, even if you’ve written up hundreds of budget plans in your life, you will still benefit from getting back to the basics and seeing how other people are doing it.
2. Get your hands on up-to-date industry software
Finding the right software to meet your organization’s needs doesn’t necessarily mean hiring a suite of developers to program original products ad hoc. Today, there are plenty of low- or no-code tools out there that empower leadership personnel to create and tweak software that meets their unique organizational needs with little to no programming knowledge whatsoever.
3. Implement collaborative budgeting to reduce cross-functional struggles
The days of thinking of budgeting as a job for a single individual or a small team of accountants have come and gone. Today, greater efficiency can be found in thinking of the budget-making process as an assembly line where each person adds their unique insight by performing a task specific to their role.
Collaborative budgeting takes the onus off one individual person or team and delegates it to a variety of other individuals across the company. For example, rather than one accountant analyzing the entire company’s budget, each department head will do so for their department and then meet to discuss a collaborative approach to the annual budget.
4. Reduce manual errors
User errors resulting in inaccurate or unusable data cost businesses a combined total of $3.1 trillion each year. By implementing a single spreadsheet management software, you can significantly reduce the number of manual errors and their effect on your budget. Depending on the nature of your business, doing so might even cut down on legal fees.
After all, we all remember what a little human error did to Citibank.
5. Routinely monitor, evaluate, and reforecast your budget
Are you familiar with the phrase “crunching numbers?” Well, think of optimizing a budget like eating nachos. You’d be in some serious pain if you swallowed after just a single crunch.
When it comes to budgeting, it’s important to crunch your numbers on a routine basis. Having up-to-date calculations and figures that represent current budgeting trends can provide crucial insights when you need to make spur-of-the-moment financial decisions to meet immediate needs.
After all, a general estimate of future business growth is a great thing to have, but if you only have one day to seize a great opportunity at a cost of $15,000, you’ll need more than just a high-level, time-based figure to make your move. You’ll need access to real-time figures that display the liquidity of your assets (that is, how much cash you have on hand).
Enjoy better control of your business budget with next-generation budget management software
Who has time to sit with thousands of invoices, receipts, and other printouts? By implementing better budget management software solutions for your business, you stand to gain a better understanding of your day-to-day cash flows and be better prepared to weather whatever storms the economy might send your way.
With features like “What If” scenarios, cash management interfaces, revenue forecasting, and more, you can save time and cut costs in ways that previously may not have even been identifiable.
Check our shortlist for the best budget management software here to see what option may be best for your organization.