With the economic crisis, companies increasingly need to keep their corporate budgets in line. In this scenario, budget management is one of the most difficult and most important tasks, as it must always be in line with the company’s needs.
By carrying out economic and financial planning, the company can analyze costs and expenses critically. This allows it to make cuts, where possible, and analyze the real need for investment. In addition, it can also carry out feasibility projects and verify the ability to improve revenues based on new market opportunities.
Efficient budget management ensures successful results and project management. However, the budget is not just a tool for the financial sector, but for all sectors of the company, which together seek to generate positive results and meet targets. Below are some tips to help you manage your business budget!
How to maintain efficient budget management?
Some practices can be applied to ensure good budget management. Check out some tips below!
Preparation of the business budget
To prepare a budget, the manager must first set a goal for the company, defining profitability, return, liquidity and risk. Based on this definition, the budget must be divided into two large groups: revenue and expenses.
Revenue calculation must be very accurate, respecting the principle of prudence and checking for defaults. When calculating defaults, always take into account the scenario of the previous year and the country’s economic scenario for the following year.
Expenses should be analyzed carefully, checking personnel costs, operational costs, administrative expenses and investments/improvements. Many organizations prepare budgets by projecting quarterly, half-yearly, annually, or even considering the next 3 years, depending on the segment in which they operate.
Budget management and control
Once the budget has been drawn up, the manager must closely monitor its execution. Every month, he or she must analyze the budget information report with the financial information (executed), comparing what was predicted and what was actually carried out. This is the most important part of budget management, so pay close attention to the numbers.
To make life easier for financial managers, we now have integrated business management systems that help with financial and budgetary control. In these systems, managers can project the annual budget with revenues and expenses and the financial budget according to receipts and payments, feed the system and monitor management reports monthly, making the necessary adjustments.
Budget review
The budget can be adjusted at any time, so it is important to always monitor it closely. If an account has gone over budget or revenue has been lost, all you need to do is analyze the entire scenario and make a new, more accurate projection. Unforeseen events, changes in the economic scenario and changes in tax burden, for example, are factors that we cannot always predict in advance.
What budget management mistakes should be avoided?
There are several mistakes that need to be avoided to ensure efficient budget management. See below!
Underestimating costs and expenses
It is necessary to monitor all costs and expenses to find the best actions to minimize spending. This way, negative impacts on the quality of processes, products and services are avoided.
Analyze all the amounts and identify which costs are unnecessary for the business . This way, if any amount goes unnoticed or if you need to spend emergency amounts, there will be enough resources to cover them.
Not carrying out frequent monitoring
The company budget needs to be monitored regularly. When this control is not carried out, the tool ends up losing its value to the company, harming the company’s development process. Therefore, it is necessary to implement this practice, simplifying the understanding of how the resource needs to be applied.
Failure to include the amount due in the budget
The company’s budget must be drawn up to make the correct decision on the next practices to be implemented. However, it is a common mistake to underestimate its importance and develop inefficient planning.
In this case, it is necessary to establish an organizational culture that helps in creating the business budget, making it truly part of the company, regardless of its size.
Making unrealistic revenue projections
It is important to make an accurate projection of future revenues. To achieve this, one mistake that must be avoided is failing to perform an accurate analysis of past values. It is also necessary to take into account all the important data to create a concrete and assertive forecast.
Not assessing the needs of each department
The company’s sectors do not operate in the same way, so although the manager is one of the team members who understands the needs best, he or she may act differently from the manager of another area.
Therefore, one of the biggest mistakes related to budget management is to make amounts available without measuring their real demands. It is essential to have flexibility in each area for an effective projection, since, perhaps, in a certain period, one area will need more resources than the other.
Disregard seasonality
Some companies have more seasonal activities than others. With this in mind, it is common for businesses to have peaks and troughs in sales, such as during holidays. Likewise, expenses and costs may also be higher in some months than in others. For example, it is possible to spend more on energy to store products at the right temperature.
Stop reviewing
The company’s budget must be used strategically. For this reason, it must encompass the business as a whole and, in addition, it must be reviewed on a predefined date to ensure that it can keep up with internal and external changes that may occur.
Regardless of the scenario, positive or negative, it is essential that the budget reflects reality. In the best scenarios, the company can take advantage of opportunities and, in the worst, an appropriate review will help to keep the financial situation as healthy as possible.
Given this, we can see the importance of business budget management, right? From there, we need to monitor information about the company’s financial situation, making the necessary adjustments to meet the established goals. So, be sure to put the tips presented into practice and obtain the best possible results.