According to Sebrae , the closure of companies’ activities in Brazil is directly linked to the lack of control over expenses and costs. That is why the business budget is so important .
This is a tool that helps in the balanced control of an organization’s budget, being one of the most important factors to keep it up and running and with healthy finances.
Therefore, in this article, we will talk about the importance of having control over the corporate budget and mention some mistakes that need to be avoided in budget management . Be sure to read!
Why do the business budget?
The business budget is a tool that analyzes and evaluates an organization’s costs, profits and revenues over a given period. By obtaining this data, it is possible to establish medium and long-term objectives and goals, as well as to examine and compare results.
It also allows you to check if there is a need to take any action in relation to the data obtained, such as examining and defining the best corrective measures to be applied.
To make this concept even clearer, check below some reasons why a company needs to make a good business budget :
- More conscious use of resources:
With the vision generated through the corporate budget , it is easier to work on reducing costs and expenses .
The company’s budget can (and should) be used by different managers and, when this happens, there is a maximization of gains, as each manager knows deeply the needs of his area.
In short, when all this knowledge is added, the company wins.
- Division of responsibility:
The managers involved in preparing the budget planning are also responsible for the goals that they set themselves.
Therefore, there is a much greater integration between managers and the role of each person in the organization becomes increasingly clear.
- Greater knowledge about the business
When there is no knowledge about what happens at the company’s cashier, about the value that comes and goes, it is common for there to be a lack of control over finances, which can generate enormous losses.
On the other hand, when controlling the issuance of invoices, contracts with suppliers, payment of taxes, among others, it is possible to see clearly the real condition of the business and even apply some changes if necessary.
- Investment in the growth of the company
For a company to continue growing, it is essential to set a budget for each sector, such as advertising, sales or administration, for example.
With the values well distributed among the areas, the next step is to allocate an amount to the growth strategy. Thus, the chances of an increase in revenue are great because the investment in improvements makes the business stand out even more in the market.
5 mistakes to avoid in budget management
For a company to have a well-designed budget that corresponds to its reality, it is essential to be aware of some factors. Thus it reduces the chances that some errors may hinder your development.
We have separated five of them that you need to avoid in budget management . Check out:
- Underestimated costs and expenses
It is essential to monitor all future expenses and costs and seek solutions so that it is possible to reduce expenses without having a negative impact on the quality of the delivery of your products or services.
Examine expenses such as rent, travel, equipment, advertising, transportation and any other major costs that may be generating unnecessary expenses for the company.
So, if there are any expenses arising from expenses or costs that have been underestimated or due to emergency situations, you will have a reserve to cover them.
See also: 4 Cost Management errors that your company cannot make
- Unrealistic revenue projection
Future revenues are often overestimated without any concrete basis, that is, information from the past is not verified so that you can project them correctly.
For everything to go well in this projection, carefully analyze the past, inflationary adjustments and any other important information that can help in creating a realistic forecast.
- Not giving the necessary amount to the budget
The company’s business budget needs to be done so that the business is well underway. And organizations that do not conceive as a fundamental part, are subject to living with bad planning and full of problems.
It is very important to create an organizational culture that values the business budget as much as accounting, that is, it needs to be part of the financial / administrative routine regardless of the segment or the size of the company.
- Static budget
The business budget needs to be dynamic and monitored regularly. If it stands still and nobody controls it, there is no value for the business, which hinders the organization’s growth process.
Therefore, the budget must become a routine because in this way it will be possible to visualize where the money is being used.
- Not all sectors and managers are equal
First of all, it is important to understand that no sector or manager works in the same way, that is, although the manager who takes care of a particular sector is usually the professional who best understands his needs, he can work in a different way than manager of another area because everyone’s needs are different.
Therefore, one of the biggest mistakes related to budget management is to provide values without assessing their real needs. It is essential to have flexibility in relation to each sector for efficient budgeting, as perhaps in a given period one needs more resources than the other.
When these 5 errors are avoided, there is a significant improvement in financial performance, allowing the company to align its business budget with a strategic plan.
In addition, good budget management brings organization to the company, making it easier to make decisions and making the work of managers easier because of good planning.
