Traditional budgeting is not meant for our times. If you are still relying on spreadsheets to control spending, you are most likely to fall behind. How we work has gone through massive change in the past few years. On top of that, COVID-19 transformed how businesses across all sectors operated. As a result, you should adopt an agile approach when it comes to budgeting. Let’s explore how you can implement modern budgeting for your organization to stay on top of your business spending.
Align Your Budget with Business Goals
Over 50% of businesses fail to align their budget with their strategy. Undoubtedly, your budget is set to fail if you allocate your resources without planning.
Therefore, start with your goals and what you want to achieve for the year.
Once you are clear of your objectives, set down to prepare your budget. You should also aim for fluidity and allow room to respond to market changes quickly.
The process will help you make data-driven decisions that are more likely to succeed.
Validate Every Allocation
COVID-19 has shown us how things can change drastically in just a few months. The same applies to the market, which is ever-changing and volatile.
As a result, your budget is more likely to fail if you base it on last year’s figures.
Modern budgeting implies starting from zero. Take a hard look at every expense you planned for this year.
Do they make sense or bring you value?
If not, they are up for questioning and further investigation.
Scrutinizing every expense helps you cut down waste and optimize resources. You can ensure every dollar of your budget brings value or helps you meet your annual goals.
Additionally, you can use an expense management tool to track your spending in real-time and stay updated.
Yearly forecasts are great but not suited for modern budgeting. We know how quickly situations can change, so once-a-year forecasts will not take you anywhere.
Instead, you should go for rolling forecasts throughout the year to stay competitive. Rolling forecasting means continuously making assumptions based on data to adapt to the market quickly.
You use current information and figures to forecast, which turn out more accurate.
For example, many businesses allocated money for travel in 2020. However, that made no sense as we had to stay locked inside our homes as the pandemic grew worldwide.
Therefore, continually analyze the present and tune your budget for the best results.
Integrate and Automate
Traditional budgeting is laborious and time-consuming. No wonder 25% of organizations take 4 or more months to finish their budgets when the best practice is 28 days.
You need to automate if you want to expedite your budgeting. Many modern budgeting tools can help you create your budgets faster and more accurately.
In fact, modern budgeting software can reduce your budgeting time by over 75%. You can also find many free tools that may be suitable for small businesses or startups.
In addition, integrate your tools to unify data and create a connected ecosystem. You will not have to worry about silos and can ensure a seamless flow of information.
Moreover, the approach will eliminate manual work like recording data on different platforms. In addition, you will be able to enjoy updated figures to understand where you stand.
Have Plan B Ready
Things are not that straightforward to predict anymore. A pandemic can put your budget into question and even disrupt all activities.
Therefore, it is necessary to plan for different scenarios and prepare yourself for the worst.
You can facilitate your planning based on real-time data collected from your integrated tools. In addition, frequent forecasting will help you refine your budget to meet present circumstances.
Modern budgeting allows businesses to control spending and adapt to market changes efficiently. You should always match your numbers at the end of every quarter to track any variances. If you find any, investigate further and dive into the root cause of the issue. Then use the insight to predict better and control your spending.
Additionally, consider automation to save time and forecast accurately. Also, integrate your tools to eliminate silos and allow a free exchange of data.
You will soon notice a difference and gain more control over your expenses.