Budgeting and forecasting are two responsibilities all business owners, managers and CEOs have to include into their day-to-day routines. Sometimes this becomes challenging, and makes decision making almost impossible. The reason for this is that people ignore ten crucial best practices that help in budgeting and forecasting.
Best Practice 1: Revenue Attainment:
The main goal of a business is not just to budget travel cost, but also to achieve a level of revenue attainment while maintaining cost control. This means one needs to think about whether they need better raw materials, salespeople or improvement in management. Additionally, knowing the source of resources is also as important.
Best Practice 2: Build Models:
There will be need to build models for operational management and risk management, based on driving forces. Think about what your revenue targets are? Think about sales plan and availability of resources and what the driving force behind them is. Using the drivers, you will be able to model new product strategies.
Best Practice 3: Prepare Budget Templates
There will be need to develop product, market and administrative reporting templates to make a budget. CEOs and mangers can use this to get a clear idea of the reporting units needed and how to manage them. This helps maintain compliance with operational strategies.
Best Practice 4 –New Strategies, Capital Projects, Sales Plan and HR Plan
These three must be included in budgeting and forecasting because they help with operational planning. Therefore they contribute to the overall budget.
Best Practice 5 – Accountability and Budget Calendar
Implement compliance with accountability and issue a budget calendar. This helps forecast the activities for the fiscal year and keeps expenses in check.
Best Practice 6 – Transparency
The management should produce actual and budgets for the public. This reflects successful compliance with operational strategies. It also serves as proof of strong management skills.
Best Practice 7 – Revise Budgets
It is advisable to revise budgets when forecasts show unfavorable developments and risks. If budgets are not revised it will be a sign of failed risk management practices. A forecast without impact is a waste of efforts and time.
Best Practice 8 – Encouragement
Managers and CEOs should be informed about their objectives and their accountability. Their objective must be built into their compensation plan.
Best Practice 9 – Acquire Best Software
The use of the best software to help with budgeting and forecasting is recommended. However the software must be capable of the following:
Best Practice 10 – Knowledge about Best Practices
There are always case studies on users of software. As the vendor to provide these case studies about the best practices the software helps with. If necessary there may be need to train your staff. They will need guidance on use of the software.
Companies using these best practices make larger profits because they keep their share holders happy.