Roadblocks to an Empowering Corporate Budget
The fourth quarter is well underway, and while the rest of the company pushes to meet annual sales and development goals, the financial department is already shifting to next year.
A high-performing corporate budget requires an insightful analysis of the previous year(s), a clear understanding of company goals, and cooperative, interdepartmental conversations.
Not to mention built-in flexibility to protect company interests from unexpected obstacles and the ability to chase new opportunities.
So how does a financial department create an empowering corporate budget? We’ll cover the top obstacles to a high-functioning budget and provide tested guiding principles to overcome them.
Roadblock 1 - Out-dated Information
One of the essential components of a high-functioning budget is consistently having updated information readily available. And this usually depends on the way that your corporate budget is stored and processed.
For example, while spreadsheets offer inexpensive and custom coding, they also bring many disadvantages regarding live, automatic updates. Instead, company leadership depends on a handful of employees to maintain the spreadsheet without errors in data entry or formulas.
Budgets are only helpful tools in decision-making if they’re reviewed and discussed regularly. Additionally, employees are unlikely to support a budget in their purchasing and sales efforts if they don’t know how their actions impact corporate finance.
Solutions to Overcome Roadblock One
- Using cloud-based financial software to maintain your budget and other financial metrics. Cloud software will automate many budget functions, like feeding bank transactions directly into the budget. Then you’ll have live data around the clock.
- Have formal budget meetings with corporate leadership at least monthly.
- Communicate to employees about corporate finance health at least quarterly. This can be simple: “Thanks to your efforts, our financial goals are on track.”
Roadblock 2 - Incorrect Data
Another top problem for many corporate budgets is inadvertently using incorrect data. This is often a two-part problem, centering on how data is collected and processed and the importance of understanding the story behind the numbers.
Manual entry provides a high risk of inaccurate data. Once again, the use of spreadsheets can lead to significant accidents that are difficult to locate and track their impact. The more people with access to editing spreadsheet data, the higher the risk of incorrect data.
Using correct information is only half the battle, however. Finances require a clear understanding of the story behind the numbers before the information is helpful in decision-making. Failure to understand the implication of investment performance, spending, and sales data quickly results in mismanaged efforts.
Solutions to Overcome Roadblock 2
- Implement cloud-based financial software to remove manual formulas and data entry from your budget process.
- Use custom access according to employee position to ensure information transparency while reducing the probability of mistakes.
- Ensure that you understand the story behind your numbers. A slow sales month could result from understaffing, mismatched marketing efforts, problems with the product itself, and much more. Without understanding the deeper story, you cannot invest in a solution.
Roadblock 3 - Disconnection from Employees
Many companies struggle to properly engage their employees in budgetary efforts. And working with people is very different from working with financial formulas.
While company employees shouldn’t be involved in detailed budgeting, cooperation is essential to success. This is why getting their opinion on using the available budget will make it much more likely that they’ll stick to it.
Companies will often use a top-down or bottom-up method to better involve employees in the corporate budget. These budgeting methods provide their own challenges in managing inter-department cooperation and a timely budget. Still, the added effort can pay out in spades.
Solutions to Overcome Roadblock 3
- Actively engage with employees to create buy-in for their support to maintain the budget.
- Try using a top-down or bottom-up method to increase engagement.
- Know the signs of employee frustration, like consistent overspending or spending allotted money on unauthorized purchases. Address these red flags by discovering why a department isn’t committed to the budget and responding to those concerns.
Roadblock 4 - Siloed Information
The larger the corporation, the more difficult it is to maintain needed privacy with accessible information. Finances provide a significant challenge, where department heads and managers need to understand their performance and how they work in conjunction with other departments.
Overly siloed information means less understanding of the big picture and a higher probability that departments will see themselves as independent of the company.
Solutions to Overcome Roadblock 4
- Cloud-based financial software allows for custom configurations, so you can allow access to financial reports according to employee title or position.
- Quality cloud-based financial software also comes with high-level data encryption, so you can increase transparency without risking data leaks.
Roadblock 5 - Overly Rigid and Inflexible
Our final roadblock to an empowered budget lands on one of the most nuanced and challenging budget concerns. How do we accurately prepare for the future when we don’t know what to prepare for?
An inflexible budget usually consists of improper forecasting methods and a limited mindset.
Without forecasting software, it’s incredibly challenging to have operational plans to respond to an emergency. There’s also a much higher chance that you won’t be prepared to take advantage of newly presented opportunities and grab new market share or other investments.
It’s also unhelpful to create an annual budget and insist that it’s “the way things are” when change is inevitable. While sticking to a budget is a critical practice, change is unavoidable.
Solutions to Overcome Roadblock 5
- Utilize financial software that includes forecasting capabilities. This software will allow you to perform multiple “what-if” scenarios and create detailed chain-reaction projections.
- Once again, regularly reviewing budget actuals is essential to your financial success. You’ll be better equipped to make changes and pivot direction if you can see a pattern early on.
- Create a flexible culture that considers a budget as a potential road to a destination while understanding that you may need to adjust the path or even the destination along the way.
Ready to Empower Your Corporate Budget?
While your company software doesn’t dictate whether or not your budget will succeed, it does play a vital role in each of these common roadblocks. So one of the most powerful investments you can make in your budget success is by using the right tools in the first place.
At Cofi, we provide high-quality software with live integrations, forecasting abilities, and much more.
Request a demo today!