Do you review your department budgets monthly with your team? Do your budgets auto update from your accounting software, CRM, and other MIS systems? Does your organization appreciate and use budgets to benchmark performance and control cash? There’s a secret to pulling great and usable budgets and predictive cash flows from your systems. And there is a process to enable monthly reviews with your executive team members.
Most small companies, once they grow to have departments, try to implement a department by department budgeting process. Most of these companies do this as a goal generating exercise using a profit and loss format and setting goals for revenue growth while trying to control growth in costs. Once a company has a controller and monthly reporting, then this process can be easier since a good controller can generate cost performance data for review by department.
What’s often missing from this type of budgeting process are 3 important ingredients:
- The budget should be informed by your pipeline of sales (your CRM plus POS systems), and;
- The budget should be informed by your backlog of production (WIP inventory and/or time resource management systems, and other front facing processing systems), and;
- A cash flow analysis of the effect of the budget on your company’s cash position should be part of the budget process.
Really great budgets don’t just rely upon your accounting and control systems for data. They munge data from all your critical past and forward looking systems to form your real financial KPI’s. Gathering and creating data is a critical budget process.