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7 Tips for a Better Business Budgeting Process

Bijan Moallemi
Bijan Moallemi
Posted on
July 1, 2021
Updated on
July 8, 2021
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More modern budgeting methods like zero-based budgeting and beyond budgeting promise to make planning processes more agile. But adopting a new budgeting method only helps if you have certain best practices in place. Learn 7 tips that can make any budgeting process run smoother.

Finance leaders have been trying to transform the budgeting process for decades.

Maybe you’ve tried one of the more modern budgeting methods. Zero-based budgeting, activity-based budgeting, better budgeting, beyond budgeting—they all promise you and your organization greater agility in planning.

But regardless of your overarching approach, certain best practices make any budgeting process much smoother. The following 7 tips will help you run a smoother, more effective budgeting process that sets your business up for success in the months ahead.

1. Focus on Outcomes First

The budgeting process should work backward from the outcomes you want the business to achieve. Before starting the planning process, think about one key question—what must be true in the budget for us to reach those desired outcomes?

Once you know your planned outcomes, you can start working with individual department leaders to plan the more granular details. Ask department leads what their plans and goals are for the year as a team.

Maybe the marketing team wants to double inbound referrals. Customer success may want to cut support ticket turnaround times in half. Another department may need to hire a new director. When you understand the goals of each department, you’ll be able to align their budgets to the overall business more effectively, ask better questions about their plans, and build long-lasting trust.

As long as you don’t lose sight of the outcomes while planning and reporting on results as the months pass, you’ll remain aligned with business partners toward overarching growth goals.

It’s great to hit your numbers—but only if hitting the numbers means you’re also hitting the right performance goals at the department and company levels.

2. Build a Foundation for Collaboration

A collaborative budgeting process depends on finance having the right systems and data infrastructure in place to create a common operating picture with business partners.

Have you designed workflows in a way that makes finance’s processes as repeatable and scalable as possible? Have you put the right systems and workflows in place to automate data capture so you always have a real-time view of your actuals?

Without taking these two steps, you may have to spend more time collecting, cleaning, and organizing data than actually collaborating with stakeholders on the budget. Modernize your underlying systems and data infrastructure so that you can prioritize collaboration in the budgeting process.

3. Ask How Department Leads Think About Spending

The other half of a strong foundation for a collaborative budgeting process is being able to communicate in terms that department leaders care about. Start the conversation by asking how they think about spending in their department.

If they have their own budget spreadsheet, what categories of spend do they look at most? Their categories probably won’t line up exactly with your financial general ledger (GL) account-based data. And that’s okay. Instead of pushing them to align with your GL account structure, focus on translating your data into a format that makes more sense to them.

When you adjust your communications to align with what matters most to department leaders, you’ll get more engagement from them throughout the budgeting process.

4. Tell the Story Behind the Numbers

Your budgeting process should be a conversation between finance and department leaders—not an opportunity to throw numbers in the faces of stakeholders. The best finance teams go beyond the numbers to paint a picture of what the numbers really mean.

Telling the story behind your numbers means doing more than just showing aggregate numbers about historical spend and future spend. Go a layer deeper than that with each department leader. Who are their top 5 vendors? What annual events is the team attending? How are employee reimbursements tracking toward the plan?

Focusing on these deeper questions will build a stronger shared understanding of a department’s spending. That shared understanding enables you to have more strategic discussions with department leaders about how to adjust spending and plans moving forward.

5. Proactively Share Your Timeline for Updates

Budgeting is an iterative, back-and-forth process—especially if you’re prioritizing strong collaboration with business partners. But the whole thing falls apart if you’re consistently making last-minute requests of department leaders who are already busy with their day-to-day work.

As you run through the budgeting process, make sure you’re proactively sending a timeline to department leads that clearly explains when you’ll need certain updates. This shows your stakeholders that you respect their time, which will help you build trust for your finance department. And that trust will carry through to future planning processes, creating a stronger foundation for your role as a strategic partner in the business.

6. Plan at the Right Level of Granularity

Granular insight into financial data is crucial to understanding the “why” behind budget variance. But that doesn’t mean you have to go as deep as possible for every single aspect of the budget. Part of an effective budgeting process is knowing when to get granular and when it doesn’t make sense to go too deep.

Adding extra granularity only makes it harder and slower to update your model. If you go too deep on things that don’t matter, you’re only setting yourself up for frustration later. Instead, get granular with the big vendors that you know move the needle. You should understand how (and why) a department spends its money on those big vendors so you can explain meaningful variances when they come up later.

Your goal is to be 95% within your forecast. If a spending category is too small to have a meaningful impact on that target, don’t bother drilling into it.

7. Tag Your Data in Detail

The way you tag your data makes all the difference in your ability to plan at the right level of granularity.

As you go through budget review cycles with each team, you don’t want to waste time investigating the specifics of every delta. The faster you can see what caused variance, the more agile your planning processes will be. And tagging your data well makes that much easier.

If you’re only looking at your budget in terms of high-level rollups, work with your accounting team to tag data more specifically. Some critical fields for investigating variance include:

  • Department
  • Vendor
  • Description
  • Subsidiary
  • Location

When you’re tagging data at these levels, you’ll have the flexibility to go as granular as needed during budgeting conversations with each department.

Think Outside the Spreadsheet for a Smoother Budgeting Process

A modern SaaS business budgeting process needs to be flexible and collaborative, and so does the modern finance leader. Mosaic’s tools are about democratizing and modernizing the budgeting process because complex spreadsheets don’t cut it in today’s fast-moving and unpredictable environment.

Use the right tools to lead with trust and transparency, and you will create a budgeting process that adapts to your people, your market, and your opportunity.

Get a personalized demo of Mosaic to find out how centralized, real-time insight into your financial data can help you establish a better budgeting process.

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