KRD Ltd. - Accountants, Consultants & Advisors

Budgeting Best Practices for Businesses

Ask any employee, manager, or owner about budgeting and you are likely to get an eye roll or groan. No one enjoys the typical corporate budgeting process (except maybe the accountants who get to fire up a multi-tabbed Excel worksheet they created last year). That’s because many budgeting processes are typically meaningless exercises in de-motivating employees – built on an unrealistic revenue targets handed down by someone in an ivory tower to meet owner, investor, or shareholder targets. But it doesn’t have to be that way.


Effective budgeting starts at the beginning of the year with each transaction. It depends on good information from knowledgeable managers across your company. It requires access to data from financial and operational systems as transactions happen including:


• Website analytics
• Sales and marketing activities and results
• Operational data – warehouse and production
• Vendor and Customer statistics and behavioral data
• Collection activity
• Inventory management


Once managers have access to the insights they need from across the organization, it is up to leaders to define the overall objective for the year ahead. With a clear focus and an eye on financial results, department managers can then go back to the underlying activity data that drives their department results.

That’s where new measures and metrics come in to play. Rather than considering just the outputs at the end of a week or month, activity measures consider the inputs that lead to desired outcomes. That’s why the marketing department should consider the number of campaigns, the number of visitors, conversion rates, and cost per lead to determine their anticipated cost and revenue targets. The AR team should consider the number of days invoices are sent after work completion as a driver of collectability. The finance team should consider the average number of items purchased by each customer at a retail location – and measure those results daily. The shipping department should know how many returns are received per day and work to lower that number over time.

With clear objectives and bottoms up budgets built on timely data, owners, managers and employees can make informed contributions to the budgeting process and create a plan that is realistic and inspiring. Ask us about our budgeting and planning tools and how we can help you empower your teams to support your financial success.

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