Whether you’re an established multi-national company or a brand new startup, handling your finances is one of the most important aspects of any business. To do that, you need to create a business budget that acts as a financial roadmap to steer your company in the right direction.
But without proper planning, did you know that some budgets could be limiting your company’s growth and potential?
If you want to ensure that your startup doesn’t end up on this path, let’s take a closer look at why business budgets fail and what you can do differently from here on out.
Budgets are typically seen as structured benchmarks in the workplace that need to be adhered to at all times; no questions asked. But more often than not, they fail to account for emergency expenses or last-minute purchases that would have otherwise not been incurred during the annual budget meeting. This could be anything from client entertainment to a simple software subscription fee.
Even if you plan out every single one of your expenses down to the tiniest detail, change will always be inevitable. Lacking this sense of flexibility in the way you manage your finances could lead to you falling behind and struggling with outdated numbers.
An outdated budgeting system or software could actually be harming your business, which could cost you in the future. Traditional budgeting systems often take up too much of your time, consume too many management resources, and are designed around outdated expense reports.
Not only are large files prone to crashing within the system, but it also doesn’t allow for seamless collaboration between multiple team members and can only be used one user at a time. If that doesn’t sound bad enough, traditional spreadsheets don’t connect directly to ERP systems like Xero or Sage.
If you are looking to revamp your budget management system, tapping into cloud-based solutions may be your best bet.
In the corporate world, it is common practice to only draft and create corporate budgets once a year. This process would typically involve the chief financial officer, finance team, and other relevant executives who are in charge of managing the company’s finances. Some key topics that may be discussed include the areas to cut down expenses from, projected sales for the following year, and if there will be any significant capital expenditures any time soon.
Along with an outdated budgeting system, the problem with this approach is how budgets can become completely obsolete within the next month. If you stick strictly to your initial annual budget and fail to incorporate surprise expenses with the changes that happen regularly, you’ll have difficulties meeting your targets.
Out with the old and in with the new. Instead of relying on traditional static budgets, try incorporating rolling budgets into your strategy. Unlike a fixed plan that remains unchanged despite changes in business activity, rolling budgets or forecasts are continually updated monthly or quarterly, depending on the way your company chooses to operate.
A continuous budgeting system like this one not only provides updated and opportunistic forecasting but also enhances tactical utility for managing cash flow at the same time. Choose a budgeting system that adapts with you.
Yes, traditional budgeting systems serve as suggested templates or references that you can use to create a spending plan for your business and stick to it. But just because it has worked in the past or for other startups, it doesn’t immediately mean that it’ll work for you.
Don’t put too much focus on having a stringent structure and take the time to discover what method works best for you. Even if it means going through a period of trial and error before finding the one that sticks, so be it. Take parts of the skeletal structure that are relevant and create your own budgeting system tailored to suit your startup needs.
If your company is still using spreadsheets and putting long hours into manual paperwork, you may want to start rethinking things. In this day and age, automation is king. Ditch manual processes and workflows and automate your finances, so you can run your business with efficiency and ease. With most startups and businesses going digital, automated budgeting software has become easily accessible these days.
Some founders still fear that there may be a drastic learning curve in the shift to digital solutions, but there is more good out of it than bad. Additional security features will be in place, enhanced data reporting will automatically be generated through the software system, mistakes caused by human error will be significantly reduced, and collaborative working between the finance team will improve at the same time — among many other things.
From expense management, virtual cards, to credit solutions, our goal here at Aspire is to make it easy for you to handle all things finance so you can focus on growing your business.
Ready to redefine the way you manage your expenses? Sign up for a free Aspire Business Account today and we’ll take it from there.