5 common challenges in company budgeting and budget control
All businesses benefit from having a structured approach to expenditure and resource allocation for meeting the company expenses. Discrepancies arise in business budget planning either because of unforeseen circumstances or poor planning. In such cases, improper budgets might hamper the company’s further growth and expansion.
Proper cost control and budget planning are especially important in the cases of small and micro-businesses where there are limited resources and overspending is not an option. Efficient cost control management can help you strategically identify the company’s priorities and cut back on expenses that are not required immediately. As such, being well-versed in both budget management and cost control techniques can allow you to use your resources to their fullest potential.
Read ahead to learn more about five common challenges companies face during budget planning and budgetary control as well as how to resolve them.
5 common challenges in creating and sticking to a budget
Creating a budget for yourself can be hard enough. When you add the challenges of funding a full-fledged business, the process can become very complicated. Even after a budget is created, there can be many factors that can lead you to digress from the company budget. Here are a few challenges in creating and maintaining a functional budget for your business.
- Inaccuracies in the data: A business can consist of a lot of departments such as recruiting, resource management, marketing and product development which all have their own expenses. Collating a list of expenses for all these departments correctly can be a monumental task. Often there are inaccuracies in the data collected which can have a major impact on the allocation of resources in the budget.
- Lack of modifying: In most cases, businesses create budgets before the start of a fiscal year based on various financial and economic factors at that current time. However, not revisiting the budget regularly or modifying it as per the latest trends can result in the mismanagement of resources and can place you behind your competitors.
- Excessive focus on financial outcomes: Since earning revenue and profits is a major component of how businesses measure their growth, most budgets focus on achieving the financial goals of the company and tend to overlook the need of improving the qualitative aspects of the business such as employee engagement or workplace satisfaction. Although these factors may not directly contribute to the growth of a business, including them in the budget can improve your company’s work performance and standing in the business community in the long run.
- Lack of time to create a budget: Creating a well-organised budget requires careful consideration of a number of factors and this can be very time-consuming. Unfortunately, the budgeting process is usually left to be completed at the end of a fiscal year when there is shortage of time and resources. This can produce inaccuracies in the budget which can be harmful for your business.
- Unwillingness to change expenditure habits: Most company budgets are usually similar versions of the previous years’ budgets with very few changes. The annual expenditure of different departments sets the tone for their funding in the next budget. This might encourage some departments to indulge in over-expenditure which can waste limited resources, especially in a smaller company.
How can you resolve budgeting issues?
Even within the digital age, many companies still rely on manual processes for budget creation and cost control. Many effective budgeting tools in the market can synchronise financial factors like invoices and payrolls to produce accurate financial reports. Accurate reports are imperative for company budgets and using the right budgeting tool can also help in maintaining your budget for the remainder of the year.
Employing an effective system of regular checks and audits throughout the year will ensure budget compliance and budget modifications as per the company requirements are properly met. Involving all your employees in the budget creation process can also motivate them to follow the budget throughout the year.
Learning about efficient budget management can significantly contribute to your company’s financial growth as well as improving your organisational and management skills. If you are looking for an appropriate course that can introduce you to great business budgeting skills, you can explore the Mini MBA Executive Development Programme at the London School of Business and Finance. The course provides a broad understanding of the required skills to excel in a senior management role. Click here to get more details about this course.
This article is written by Sweha Hazari and edited by Amelia Hayward-Cole.
The global pandemic has highlighted many heart-warming and positive stories of grit, resilience, kindness and collaboration from across the planet.…
In just a few months, COVID-19 has changed a number of sectors including tourism, healthcare and education. Each sector is…