BY VIZIO CONSULTING INC.
Budgeting does not imply denying yourself items you desire. A budget, when done correctly, acts as a plan for our financial future. In reality, a precise, well documented budget is an essential component of a sound financial strategy.
Unfortunately, misconceptions regarding budgeting lead to many well-intentioned people making mistakes or abandoning the notion of a spending plan entirely.
We’re here to help you stop your financial mistakes once and for all. Before that let’s have a deep dive look into major budgeting mistakes that companies make.
Mistake #1: Not Ensuring a Clear Understanding of the Budgeting Process and Cycle
Budgeting and planning cannot begin without data gathered from many individuals and systems inside the organization. Even though business budgeting takes place around the same time each year, we are frequently shocked by the amount of dissonance between management, finance, budget managers, and their staff on the budget cycle, requirements, milestones, and duties.
It is too familiar in many organizations for conflicting goals to cause delays in internal planning procedures or for managers to become confused about what they need to submit and when.
Planning should come before budgeting, as a rule of thumb.
Mistake #2: Relying on Spreadsheet Budget Templates
Regardless of how effectively budgeting templates are constructed, administering and monitoring budget workbooks and Excel spreadsheets is inefficient, time-consuming, and frequently error-prone.
Anyone who has worked on a corporate budget in Excel knows the plethora of templates sent and circulated to the firm to capture the data that the company needs for planning efficiently.
This spreadsheet misery may be manageable for smaller businesses, but workbook-based budget models do not scale. From start to end, the entire process of gathering to assembling might take weeks or even months, resulting in significant administrative work, data deterioration, and a general lack of trust in the process. A spreadsheet-based budgeting method is not a wise business strategy and is ultimately unsustainable when a firm increases in complexity and scale.
Mistake #3: Manual Reporting & Presentations
In virtually all circumstances, changes and scenarios are required after the presentations and reports are done, which means the entire process of changing the underlying budget data and re-creating charts and reports must begin from scratch.
For years, Excel has been the go-to tool for many organizations to convert tables into graphics. Spreadsheets are simple to use and provide tools for creating charts, but they cannot intelligently analyze vast amounts of data and need a lot of human labor to create one-off charts.
Tables frequently include static data that has an expiry date (becomes fast obsolete), and the integrity of the data might be a worry since it can be rewritten or formulae can be broken. The next best alternative is to hire skilled analysts or IT personnel to develop custom business analysis software and algorithms, but this is a time-consuming and costly solution that is not feasible for small and medium-sized businesses.
Mistake #4: Not Re-forecasting Throughout the Year
Companies that rely solely on annual budgets risk missing out on significant trends that might lead to better decision-making and business outcomes. One of the most common issues with establishing a yearly budget is
that it loses accuracy as the year goes. Assumptions based at the start of the year are frequently incorrect by the middle of the year. According to mounting data, even the most meticulously designed budgets can become obsolete in three to six months.
This is due to the unavoidable and genuine changes in a company’s micro and macro environment, not to the individuals who worked on the budget.
While there isn’t much that can be done (even if a business uses hedging), finance management should reconsider their annual budgeting strategy and instead conduct quarterly forecasting.
Mistake #5: Lack of Collaboration, Coordination & Information Exchange Between Stakeholders Involved in the Budgeting Process
Budgeting isn’t something that happens in a vacuum. Being helpful requires timely input, data, and cooperation throughout the whole business.
As many financial executives can tell, gathering data from many sources is complex and time-consuming. It often results in each budget being prepared independently, without regard for the more comprehensive picture. Leaders and employees in today’s businesses are always on the go. As a result, remote access to vital business systems and operations is essential. Budget contributors should be able to revise, collaborate, and submit budgets
on time and from anywhere if finance leaders make it easy and available.
Mistake #6: Overcomplicating the Budgeting Process
Don’t make things more difficult! There are numerous tools available to help with budgeting. If you’re looking for a free budget template, consider the following:
There are numerous options available, but keep in mind that many budgeting apps will require you to link your bank account. Before giving an app access to your bank accounts, make sure you check the number of downloads, app reviews, and star rating. You don’t want to give a malicious service access to your finances.
Mistake #7: Not Setting Realistic Assumptions
This error is frequently the consequence of imprecise job expectations, a general misunderstanding of deadlines, and a history of disclosure and enforcement from finance management. Scheduling and
prescriptive deadline adherence may assist create a well-oiled budgeting and planning machine and avoiding this costly misstep.
Budgeting and planning for your company shouldn’t be uncomfortable, and gathering and organizing budget data shouldn’t be a chore. Spreadsheet-based budgeting is more of a hindrance than a business benefit for most businesses, resulting in an excessive amount of time lost, long budgeting cycles, obsolete data, and disgruntled contributors who can’t access or participate in plans. However, significant progress has been achieved in budgeting and planning software.
Both cost-effective and scalable solutions are now available to fit any business size or level of budgeting complexity. These budgeting solutions are committed to combining the finest of Excel with the centralization and convenience of internet access and appropriate security.
All corporate operations must change to become more simplified and automated, and this is no exception.
VIZIO can help you empower your planning and budgeting process. Our experts provide personalized demos after understanding the business needs. Click here to talk to our experts.