Tips to avoid trouble with your budget planning

The year is ending and it's more than time to start thinking about strategic planning for 2018 business budget. The experts' consensus is already from the end of the previous year. In fact, anticipating the Budget plan Planning the following year in advance is fundamental for the financial health of any company.

By the way, it's good that you and your company remember the fact that 2018 will be more than an atypical year: elections and the World Cup have an impact on the economy, daily life, and companies' revenue.

The current moment

Furthermore, the timing isn't ideal. The crisis which we have been trying to escape for years reinforces the idea that all companies need to know how to dose efforts and energies so as not to act without direction. The fact is that, without guidance or planning, it becomes more difficult to achieve established goals or even understand the current situation to think about the future.

In other words, as if what awaits us in 2018 wasn't enough, the year 2017 was marked by cost reduction, layoffs, and a substantial drop in revenue. In this context, some companies have taken out loans or had to refinance their debts. And changes and bad news like those described must offer something to learn: the importance of having strategic planning thought out as soon as possible to know how to avoid budget errors.

What to consider in the strategic planning for the 2018 budget?

The recipe is the same, but not everyone follows it strictly: do your homework, reduce costs, organize processes, and rely on strategic management solutions to maintain efficiency, competitiveness, and profitability. If there were additional conditions, such as what we discussed about debts, it's time to sit down again to renegotiate deadlines and terms.

Even so, thinking in practical terms when adjusting the 2018 accounts, we’ve prepared a small and efficient list to know what should be included:

Create planning levels

Corporate budget development can be divided into three stages:

• Strategic: analyze the company as a whole, and in the long term. Revenues, projections, goals, and objectives;

• Tactical: Observe each sector separately, study the costs and investments made in each.;

• Operational: What to do, from this moment on, to organize finances. The historical perspective here is fundamental to avoid past (and future) mistakes.

Define budgets by sector

Many managers make mistakes when they reach the tactical level, the company budget by sector. Therefore, each department must be analyzed differently. In marketing, for example, it is important to measure ROI, a very important KPI for the sector.

Separate expenses and income

It is essential to be able to compare the resources you have available, how much you want to accumulate, and how much will be dedicated to paying business costs. As this is a time of crisis, your company can establish that expenses should decrease by 18%. From there, adjust the accounts so that the numbers balance.

Choose the type of Budget

There are companies, such as those with more centralized management, that prefer to work with static budgets. On the other hand, flexible budgets are useful for operational applications, allowing adjustments that adapt to demand. The Beyond Budgeting model is also worth highlighting for cases with cycles longer than one year, or the Zero-Based Budgeting model, which is more detailed and does not take previous years into account.

See also: Why invest more time in your budget management?

Has your company already started thinking about next year's planning? We hope today's article will stimulate anticipation for this fundamental task for resource maintenance and the company's continued presence in the market. If you have any questions, feel free to contact us. Stratec is happy to help find solutions. Until the next article!