Creating an annual budget doesn’t have to be an exercise in guesswork.
Is your company motivated to create a better annual budget?
Perhaps, in years past budgets have been made (or set) and then reality has crept in proving projections wrong, or the annual budget was based only on historical data and not on well-planned forecasting. Whatever the case, the promise of a practical, useable annual budget lures many mid-sized business owners into re-examining the process of creating and using an annual budget.
For corporations and nonprofits alike, annual budgets are crucial to planning income sources and allocating funds for predictable expenses. Planning for those assets, liabilities, and equity as well as cash flow, debt management, or discretionary purposes is necessary for a company to continue to operate.
When creating a forward-looking budget, the danger is in the desire to make it perfect. Instead of trying to make the budget perfect, let it be a scaffold that the quarterly forecasting will fill in. It is important for companies to set specific cash flow and operational targets. Once those are set, they act as the benchmark for quarterly re-evaluations and forecasting based on actual results. Without quarterly assessments of areas in which the budget and actual expenses are not in sync, there is no room to course-correct in real-time.
Between the labor-intensive task of creating an effective budget and then updating it with real-time data, many businesses fall back on guesswork and conjecture. The day-to-day running of the business doesn’t allow for the necessary time and level of detail to get accurate, timely, effective numbers.
Bringing in a fractional CFO can provide the insights necessary to implement an actionable annual budget that gets used by leadership and your internal accounting department.
According to Deloitte’s Global Outsourcing Survey, 59% of companies that outsource do so because of the cost-cutting benefits. While there are many other advantages to outsourcing, one of the most compelling is the ability to reduce costs associated with hiring C-suite team members.
When your company has access to the insights an accurate annual budget provides with the help of a fractional CFO you will be able to more accurately predict and plan for stages of growth.