Budgeting Model

Synopsis

Without a budget, it's hard to identify risks and challenges and determine how quickly you need to address them before your financial resources suffer. Our Budgeting Model spreadsheet collection makes the process easier and helps monitor finances and make better-informed decisions for your organization and its individual departments.

Sheets highlights

Illustrate relationships in your financial and budgeting data with graphs to make it more appealing. For more graphs, consider using our Charts Collection (Part 2) presentation collection or our Ultimate Charts (Part 2) collection.

Budget consolidation is critical in cases where interest eats into revenue. When consolidating, remember that consolidation should be growth-sensitive and demand-sensitive for a more assertive analysis.

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Overview

Our Budgeting Model collection contains four budgets for Sales, Marketing, HR and IT departments, with a consolidated budget, headcount data and charts. Use this model to create a quick and powerful budget based on simple assumptions. Below, you can find a video with a detailed tutorial on how to use this collection to build a precise Budgeting Model spreadsheet.

Application

Budgeting is tricky, but it becomes challenging in times like the COVID-19 pandemic 2020. In the article, "An Agile Approach to Budgeting for Uncertain Times," Harvard Business Review (HBR) discusses the three things you can do when budgeting during uncertain times:

• Change the purpose of planning and budgeting – planning and budgeting models are designed to help senior management forecast, command and control. First, forecast precisely what the company must do to deliver stable earnings per share (EPS) trends. Then, order each business department and function to execute the plans that will add up to the targeted total. Ne monitors activities within each department to ensure the team members stick to plans and deliver desired results.
• Shift the focus from financial precision to strategic success - a good approach is to turn the targeted outcomes developed in step one into strategic portfolio guidelines that drive the budgeting and adaptation process, which will spark discussions that allocate resources from the strategy down, rather than from individual projects up.
• Plan faster and more frequently - if budgets are inflexible and a crucial forecast can't be adjusted, the person making it excessively stressed over the budget accuracy. Even small mistakes can compound over time and affect strategy if not fixed. On the other hand, adjusting a long-term forecast every quarter, month, or week allows for continual accuracy improvement.

Expert advice

Forbes put together 10 tips for stellar budgeting:

1. Understand what a budget is - A budget is not meant to manage every dollar you spend. It's instead a guide to assist you in making better financial decisions, and it can be an effective tool for identifying areas for improvement.
2. Know your organization – It's crucial to know the risks of your organization and industry. If you operate in a significantly seasonal industry, the experts say you will likely need to break down an annual budget into quarterly or even monthly.
3. Be conservative – factor in some level of the unknown and make sure you consider the need to plan for the years ahead. "Economic downturns are inevitable, so in a strong economic year, you should not only create a balanced budget but also start building up a cushion for the anticipated rainy days," the experts say.
4. Be detailed – The more explicit your trial balance is, the more effective your budget will be. You don't want a separate line item for each check you write, but the more details you include, the better. Start by tracking expenses in accordance with your charbyem] [item]Share your budget – An organization's budget shouldn't be kept a secret. Sharing the budget increases transparency, feedback, and beneficial organizational communication. The experts say: "The more you can empower and engage your employees, the better off your business will be. Know your organization, build the right team, and share your budget with the right people. Its potential impact as a tool can be widespread."