Are you ready to dump painful Excel-budgeting for an easier and more efficient way to create a budget that will help you achieve your corporate goals? If you are, then you are ready to learn how you can use the budgeting process as an effective management tool that will achieve the following results:
Easy to prepare and use; Easy to get buy-in with all departments; Easy to integrate into your corporate plan; Drive incentive plans to reward targeted behavior;and Make the process next year even better.
The steps below will show you how to escape Excel Hell and be on your way to a new kind of budget preparation that is heaven sent.
Determine the five to seven business driver metrics.
Use those metrics in a flash report logic that runs through the budget framework and philosophy .
Create a standard Excel input template to reduce Excel Hell.
Standardize charts of accounts and reporting formats.
Emphasize that budgets are done on a monthly basis, not as a total divided by 12.
Meet with departmental heads to help them see the budget as a tool, not as a weapon.
Build from the bottom up by department so departmental ownership is created.
Present results in a manner understandable to line management and department managers.
Involve department heads so they own the process and results.
Minimize the use of allocations where possible to increase user confidence in numbers.
Move toward some version of flexible quarterly budgeting process.
Use software packages that show underlying details so users can research and understand variances form budgets.
Use both realistic budget targets and stretch budgets to manage and incorporate with your incentive plans.
Integrate with some version of Balanced Scorecard.
Provide historical 12 month income statements for users to review for the budget process and then incorporate them in their ongoing review of budget comparisons to identify trends early on.
Hold people accountable for their budgets.
Create a transition path to move to budgetary software modules which are now becoming much more reasonable in price.
Consistently ask for suggestions on how to improve the process.
Ask the following: (a) What are the three best opportunities we can create longer term and what do we need to do to best pursue those opportunities? (b) What are the top three concerns you have about meeting the next budget submitted? (c) What actions can we take to minimize the risk of those concerns on the next budget? (d) What are the company three top longer-term risk area concerns today and how would the company react if those concerns actually materialized? (e) What are the three most crucial infrastructure issues the company faces over the next one or two years?
Create key inputs on the Executive Dashboard so you can refine what if scenarios.
Create at least one scenario that is far in excess of believability on both the upside and downside.
Watch out if your board does not understand the business risks the company is taking as identified in the budget.
Use the budget to support soft (read: non financial) goals.
Bottom line? - Stop Profit Leaks Now. Apply this information to improve your profitability, reengineer business models, and strengthen or gain competitive advantage in the marketplace.
And apply the free Fiscal Test available at http://fiscaldoctor.com/fiscaltest.html
From the author of the forthcoming book, Stick Out Your Balance Sheet & Cough: The FiscalDoctors Prescription for Turning Profit Loss into Profit Gain
From Gary W Patterson, http://www.FiscalDoctor.com Copyright 2008
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