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Time to plan ahead for success....It’s that time of year when the world is preparing for Christmas, businesses are preparing budgets and planning for the year ahead. We love Christmas in our house, the sound of Andy Williams singing “It's the most wonderful time of the year” resounds in our heads. So instead of having your head down immersed in the figures take a little time to grab yourself a hot chocolate with marshmallows and have a read of this article giving you some of our top tips for making the budget season a time of reflection of what happened in the past and a time of excitement of the endless possibilities for the future.
Top-down or Bottom-up
Top-down are the wishes from the Board or senior management, and often they want too much, and Bottom-up is the detailed forecast from the team and can often be a little safe, so neither is the correct way on their own. Much better is where the Top-down wish meets the Bottom-up forecast which ends in a budget that is both challenging but still achievable. This approach will keep everyone engaged with the process and the plan.
Give it a great name
Budgets are often seen as an arduous task, something that limits parts of your business on what can spent and puts pressure on other areas of the business through targets. We see the budget as the “green light for go”. It is the plan of action to kick start the year and we have seen some great examples where businesses name their budget. This gives everyone the theme and direction for the year ahead and builds alignment. Examples such as “Get it right first time – for a budget focused on profit and efficiency” and/or “Build it big for 2020 – for growth and expansion”…these certainly focus your mind and are a constant reminder of what you wanted to achieve throughout the year.
It is not all about the figures
Often when a budget is completed it is centred around the set of figures that maps out the year ahead, the sales, costs, expenses and profit that will be achieved if everything happens as planned. The dictionary describes a budget as a “financial plan for a defined period” Don’t get us wrong the numbers are important but the actions that sit behind them are critical. Bridging your budget, ie. Creating a visual aid of what activities will be annualised, what will not, the initiatives for the year ahead, the value of them, who will deliver them and when they will happen will help you track performance and importantly understand where you are at any point in time.
The short term feeds into the long term
If you define where you want to be in a few years time and work back, you will probably find you need to start doing things differently today, or even yesterday!
The budget for the year ahead should fit into your long term plans and aspirations for the business. If you do not have a longer term plan, as soon as you have set the budget for the year ahead, start building your 5 year plan. A strong 5 year plan should be directional, fluid and flexible where it needs to be, clearly defined where investment is required, clear, engages your business and ultimately inspires you and your team.
It is all in the execution
Poor execution of your budget will allow it to fail. We all get busy and stuck in the detail of our day to day roles so giving yourselves a process where you continually check against the budget gives you the opportunity to act and to change the course of the year. So put in place a process that sets deadlines, owners of actions and the track-ability of things and this will give you more chance of being successful.
