Budgeting is one of the most crucial aspects of business planning, and yet too often it is not given the attention and input it deserves. If done right, budgeting can help you to prepare for almost any eventuality, saving you time and money in the long run.
Some of the most common mistakes we have come across in budgets are:
- Financial or department heads creating a number they feel 'should cover it' and hoping for approval, as opposed to budget numbers being driven by the experience and activities of the previous period combined with current information from those on the ground.
- Not making provision for recruitment – from costs of the actual recruitment to budgeting for additional salaries and other staff costs.
- Not taking contractual annual cost increases from vendor contracts (rent, for example), into account.
- Things just not adding up… Simple casting errors that throw everything off.
- Budgeting for expenses inclusive of VAT, resulting in over-inflation of expenses.
- Adding excess provisions and unplanned costs that never come to fruition, bulking up the budget with miscellaneous items.
- Including costs unrelated to revenue.
- Budgets that are predominantly fixed costs as opposed to more variable costs that allow some movement in line with business growth or change.
- A lack of understanding of, or ability to follow, budgeting instructions; causing delays, missed deadlines, incomplete or incorrectly completed budgets.
- Not monitoring trends of costs in relation to revenues compared to previous periods.
Using specialized budgeting software can help to ensure that these common mistakes don’t become central to your budgeting process. If your software is user-friendly for even the non-financial managers, the process becomes less complex and simple errors or exclusions are less likely to occur.