Grow confidently with a professional financial team backing you up.
Bookkeeping & Accounting
The Wrong Way to Budget a Business
You walk into the budgeting meeting with dread and irritation – every year the budgeting meeting is a complete waste of time. The accountant shares their screen: a spreadsheet full of numbers they made up using nonsense formulas. They ramble on for 50 minutes about budgeting strategies, losing everyone’s interest and leaving only 5 minutes at the end for your comment that the figures are unachievable. But the accountant says the company is cash constrained, so there are no alternatives. You walk out knowing the targets are impossible and figure it’s time to update your resume.
Sound familiar? Most startup accountants and outsourced CFOs have a dysfunctional budgeting techniques. Signs of bad budgeting include
Unachievable numbers.Unachievable numbers.
Managers who believe budgeting is a waste of time.
No budget for the balance sheet or statement of cash flows.
Reliance on software for budgeting rather than interviews and collaboration.
Poor explanations from managers when they miss their budgets.
The Right Way to Budget a Business
Imagine walking into a 1 on 1 budgeting meeting with the finance director. They begin by asking you your goals for the coming year, which you explain over the next 30 minutes – expanding your customer base, launching a new product, improving customer support, etc. The finance director listens carefully and takes notes. What do you need to be successful? Hiring some new team members to support your growing department? Outside contract services? Staff training? You walk away from the meeting feeling understood and cautiously optimistic about your budget.
One week later, you meet with all the managers to review the company-wide budget. The finance director explains there is not enough cash in the organization to support all the initiatives – so which ones will we forego? You and your colleagues discuss the best budgeting strategies for an hour. Every initiative adds value, so it is difficult to agree on cuts. But at the end of the day, everyone trims back a little bit by deferring projects one year, and sales commits to a higher revenue target in exchange for extra support from operations. The budgeting constraints weeded out the marginal projects.