Note: Running most Fridays in FromGregsHead.com, this is the first in a continuing series of budgeting tips brought to you by Ventana Research and PKF Texas. These run Saturday mornings during the BusinessMaker’s Radio Show on FM Newschannel 97.5. Audio files can be found on the Entrepreneur’s Playbook page of the PKF Texas website.
With all the advances in technology, software and collaboration tools, one might think the budgeting has risen to new and more effective higher levels. However, recent research has shown that executives in mid-sized companies have not focused on the potential benefits of more effective budgeting and are unaware of possible solutions that can be quickly implemented.
Questions to Ask About Your Budgeting and Planning Process
Is the process strategic? The CEO of you company has a strategy, but how well does the financial budget reflect it? Is you budget realistic or just update of last year’s amounts by a factor of inflation?
Is it accurate? Are the budgets as accurate as they should be? Does the budget process itself create systematic errors?
Does it increase your company’s agility? Does the company respond quickly to changes in the environment or changes in the competitive landscape? When things don’t go as planned does the company have a coordinated response?
Does it provide deeper insight? What assumptions are being made in forecasting? Can you drill down to ascertain consistency, assumptions, etc?
Does your budgeting and planning process improve process quality? How quickly can you prepare your budget? Is it consistent from year to year and department to department? What tools are you using to help in this effort?
We recommend that you start to improve your budgets by looking at three key areas:
1) Making strategy explicit;
2) Increasing collaboration
3) Optimizing resource allocation.
With this focus, you can improve your budgeting process and your results.