Earlier this week, we outlined the first two functions of successful business budgeting as defined by the Harvard Business Review: planning, and coordinating and communicating. Today we complete the budgeting process covering the final two functions: monitoring progress, and evaluating performance.
3. Monitoring Progress
The first two functions of business planning are designed to put the plan in motion. But remember, the days of yearly, static budgets are over. Today it’s all about being nimble enough to adapt and change your plan according to your overall business progress. That’s why monitoring progress is essential to successful corporate budgeting.
Compare your actual results with the budget you created. It’s up to you to determine how often you do the comparison. Once a month is good starting pace. But if you find your business performance to be particularly unpredictable, bump that up to bi-monthly.
Monitoring is half the battle. It does you no good unless you are prepared to take corrective action if you find a variance between the actual and expected results. Cloud-based budget reporting software is helpful in this case because it allows you to track business performance in real-time. Integrate that reporting tool with a visual analytics solution, and you’ll be able to produce financial reports that reflect real-time performance within easy to understand graphs and charts. This helps people outside of finance understand the financial state of your business.
4. Evaluating Performance
Achieving corporate goals requires a high level of accountability throughout the organization. If you have the financial reporting software solutions in place to efficiently evaluate actual results to the budget for a given period, it’s easier to determine the success of individual business departments in achieving pre-determined goals. Performance evaluation serves other very important purposes, like providing the starting point for future assignments, and creating a basis for future resource allocations.
As you can see, there are many components to creating a successful budget. Without the right tools the budgeting process can be a time-consuming and tedious task, discouraging finance teams from monitoring and maintaining an agile budget that reflects actual business performance. Budget forecasting software can help to automate much of these tasks, as well as boost cross-departmental collaboration. The result is an efficient financial budgeting and forecasting process that allows finance teams to focus more time on decision-making and other strategic initiatives.