Learn about some common mistakes companies make in their business budgets and how to avoid them
Improving the organization's economic performance by increasing margins and reducing expenses is the goal of every financial sector. However, this can only be achieved by investing time and energy in drawing up and monitoring the budget, so that it serves as support for implementing the organization's strategy.
In order to have a well-planned budget that is in line with the company's reality, it is important to pay attention to some essential factors that can eliminate very common mistakes in companies. We've listed five common mistakes that you can avoid. They are:
- Not seeing the budget as a critical factor in the organization. The budget is key to supporting the strategic planning It must therefore be seen as a critical mission within the company. Otherwise, the budget will always be poor, with unrealistic forecasts and no buy-in from the company's leaders. Awareness must be created within the organization that making a good budget is fundamental to business success.
- Ignoring communication when budgeting. In order to make a good financial plan, you first need to invest in internal communication to gather information, negotiate priorities, document agreements, make justifications, explanatory notes, etc. Communication is fundamental so that the budget represents the reality of the company and is adopted by everyone legitimately, with a view to achieving the strategic objectives.
- Treat everyone in the company the same. You have to think that different areas have different needs and that's why you can't use a single budget form for all sectors. You need to be flexible when gathering information and negotiating the availability of resources.
- Making budget planning in Excel. Excel is a very useful tool in the day-to-day running of companies and meets a variety of demands within an organization, but it is not the ideal tool for creating a database, nor for developing a system. For this, there are other alternatives that can systematize information, creating cross-control for each expense or revenue, either by nature or by cost center. Because Excel is an open tool that is fed in manually, it increases the chance of errors when manipulating the data, which can lead to serious management errors.
- Only think about the budget once a year. The process of creating and budget planning may not be one of the easiest within an organization, which is why it is a trend among companies to go through this process only once a year. However, with a system that can support this budget-building process, it will certainly be a simpler mission and, for this very reason, it can (and should) be reviewed more often. And the more up-to-date the budget is, the better it will represent the company's real needs and possibilities, improving the quality and reliability of the information and also making it easier for managers to make decisions.
Preventing budget errors from preventing your organization from achieving its strategic objectives is a big step towards success.
See also 06 tips for efficient strategic management in your company.
