Guide for achieving your business budget
As an entrepreneur, your focus relies on growing your business. Clarifying the vision and developing it into a coherent strategy, which is applicable and actually is applied by the team, requires a permanent effort.
On the other hand, it is necessary to ensure that the business develops in security conditions, namely you have to take into account risks, to take care of the portfolio of clients, of the relationship with your partners, to follow the macro-level trends in the economy and the industry in which you operate or from the industries you are related to (e.g.: FMCG and transport).
Last but not least, you watch out for money: namely, to have sufficient working capital when the estimated increases are not becoming a reality or when the estimates are exceeded.
In this context, we propose to identify together the manner in which the implementation and monitoring of the budget can help you. The budget has two components: P&L (Revenue and Expenditure) and Cash Flow, which must be built in parallel, in a correlated manner.
The budget is a sacred aspect for any manager
By implementing budgets at department level you will reap benefits such as:
- the management thus assumes the budget and their accountability is established
- you will be able to correlate budgets with the expected results, by defining and monitoring performance indicators (KPIs) at department level
- you will have a control tool that allows you, as an entrepreneur or CEO, to delegate more and focus on the strategic area.
How do we build the budget
- What is the best approach: an authoritarian or democratic one? Namely top-down or bottom-up?
Often you, as an entrepreneur or CEO, set the target for the following year and then you communicate it to the management team. In parallel, you can perform an exercise with your sales teams, which will generate confidence and involvement, namely to challenge them to draw up the sales target, detailed per product categories, industries, regions, existing/new customers. By consolidating the figures, you will see that there are differences in terms of approach (optimism or pessimism, from case to case) and you will have to standardize the working hypotheses and assume a common goal within the team. Moreover, important steps are already being taken to define the operational action plan, which gives the team confidence.
For cohesion purposes, it is good for the overall performance of the company or of the team to have a weighting in the evaluation of the performance at individual level and finally in the bonus granting scheme for your employees.
- Departmental budgets
Starting from the common target, the department managers start the budget construction by answering these questions:
– What is the contribution of my department to the global objective? How do I measure, what are the relevant indicators? What are the secondary performance indicators of the department?
– What are the resources needed to reach our goals?
Thus, a department manager appears before and supports within the Board or in front of the entrepreneur these 2 components: performance indicators and the budget of expenses and investments.
- The consolidated budget (Master Budget)
The Financial Director sets the assumptions together and validates them with the CEO / entrepreneur, who is presented with the consolidated budget of revenue and expenditures, as well as the global performance indicators. Adjustments are made, so that the budget reflects the desired level of profitability.
At this stage, the managers are asked to work in synergy, to define common projects, for example: sales-marketing, HR-sales, sales-logistics.
Dynamic Budget or Business Simulator
There is an increase in frequency of debates related to whether working on a budget limits you in taking advantage of opportunities and making decisions that differ from the paradigm in which the budget was built.
That is why we propose to understand and implement the Business Simulator in the routine of financial management and reporting. The business simulator is a dynamic budget, by means of which you adjust and recalibrate hypotheses on a regular basis, depending on the new business decisions, the results already obtained and the macroeconomic conditions / forecasts from the industry / market.
What do we offer as an external consultant?
- We have experience in working with various organizations and in various structures and sectors of activity.
- We bring in to the mix expertise in project management: the correct implementation of the project and the transfer of knowledge to the internal team, the observance of the agreed terms, the creation of working procedures and the co-interest of the internal team in terms of achieving the project.
- We ensure maximum transparency in the relationship with the management.
- We are independent.
- Professionalism – with experience and expertise, we can integrate the results of this project by means of recommendations for the company’s strategy, as well as in the operational side, in term of your company’s budget monitoring.
About: Ioana Arsenie – Trusted Advisor Strategy & Finance – is an expert in business strategies with expertise in financial, tax and management consulting who provides by means of her company integrated services of financial strategy and accounting for Romanian entrepreneurs. Since 2000, Ioana has experience in strategic and financial management and has occupied in a top agribusiness company positions from CFO to Financial Business Partner at national and group level in countries such as Turkey, Greece, Ukraine, the Republic Moldova to implement and update financial processes, as part of the strategic directions. Ioana is also Elite Business Women Ambassador and Founder of the EduPerformance Star Association.
- Website: ioanaarsenie.ro
- Phone: 0727 765 520