Clocks moving forward signify an important transformation for any Finance professional……the start of the new financial year! I always feel the new financial year comes with excitement as we start afresh with budget projections, evolve the business strategy and build upon our previous years’ achievements.
It is essential for any organisation to have an effective budget in place, one which is credible, and all functions buy into. Here are some of my hopefully helpful tips on an effective budget process:
- Have a standard budget template for functional leaders to populate
- Take account of seasonality…nobody should be surprised by Christmas
- Ensure the budget process aligns with business strategy
- Meet with all department heads and discuss the numbers in detail
- Buy in and agreement from all personnel
- Run budget numbers through financial model to ensure viability
- Ensure feedback loop – communicate final budget numbers to department heads where they need to cascade targets to team members – everyone is accountable
Underpinning this process is ensuring that you have a budget which is both challenging, realistic and achievable, whilst ensuring growth from the previous financial year. Finance should be on hand throughout the process to act as a strategic partner, helping functional leaders understand business performance, enabling them to make effective decisions and budget projections. A feedback loop is vital in ensuring a sound budget process as this provides the business with a final opportunity to agree on projections for the next financial year. Robust financial modelling is essential in ensuring that the budget is financially viable.
Key to an effective year is ensuring that the budget is monitored closely. Finance should regularly review actual performance against budget and then issue regular reports. Again, feedback is key along with real time and meaningful data! Any organisation must remain agile to the environment in which they operate ensuring any deviations from budget are observed and the business can adjust accordingly. Meetings will be required with department heads to develop improvement plans where necessary.
In line with implementing a regular budget review, it is prudent to understand the cost drivers within your business, optimising your overheads and maximising profit potential. Don’t be complacent with your suppliers, look for cost reductions, ensure your business regularly benchmarks and value for money is the focus whilst sustaining premier customer service.
Hopefully this has given you some food for thought regarding the budget process. It gives finance a great opportunity to support the business in achieving their vision, goals and strategy. This coming year will be an exciting time for Jacksons Law Firm, where we will continue to grow, prosper and deliver a first-class service to our clients.
Amie Callan, Head of Accounts
