Budgeting and forecasting is crucial for any business and provides a very effective way to plan for, and optimise, the year ahead. Below are 10 tips for improving the way that you handle this essential process.
- It’s not just about the finance department. Effective budgeting and forecasting should involve key people from right across the business. It’s likely that you’ll need accurate data from a range of different sources to ensure that your budgeting and forecasting is truly on point.
- Introduce flexibility. Budgeting and forecasting needs to change as your business does – if you’re still basing your decisions on data that was gathered months ago then you could be hampering growth with inaccurate insight. Build-in more flexibility for greater accuracy and better results.
- Try a process of rolling budgets. For example, try this on a 3-monthly basis so that you are forecasting based on information from the most recent quarter, as opposed to what happened at the start of the year.
- Budget to your plan. This will ensure that you’re making budget decisions based on actual revenue as opposed to the income that could potentially be generated by the spending decisions you make now.
- Invest in extensive insights. In reality, this means being prepared for anything – or as many scenarios as possible that could potentially throw your forecasting goals offline. Stay on top of the market and economic trends and if you get new data then give your business more agility by using rolling forecasts that you can easily integrate changes into.
- Make sure your budgeting and forecasting support alignment between operational and organisational strategy. This means involving all departments right across the business and ensuring that everyone is constantly talking to each other.
- Define your goals. The goals of the business are basically the driving force behind the forecasting predictions that you’re looking to make. So, if you’re not clear on what your business goals are then accurate forecasting is likely to be difficult.
- Make tracking a priority. This should include absolutely everything and anything that could potentially have an impact on your financial outcomes. It might be something like office supplies spending or what’s happening to your competitors in the market. When you’re forecasting, tracking data such as customer behaviours, market trends and what the economy is doing can all be essential.
- Ensure your budget includes profit targets and cash flow targets. These are two very different metrics but both are equally important to ensure that your budgeting and forecasting are functioning optimally. If your budgeting and forecasting don’t contain profit targets and cash flow targets then they may arguably not actually be that effective.
- Move away from Excel. Spreadsheets have been the go-to tool for budgeting and forecasting for some time but they are not the most reliable or efficient option today. Cloud-based systems can provide more flexible and agile systems that are better suited to your business and keeping it on the right financial track.
These budgeting and forecasting tips will help to drive improvement right across the business.