If there’s one thing that 2020 taught businesses globally it’s that responding to change well affects your success. Most businesses budget for the next fiscal year ahead of time in the run up to the new financial year. Others prefer to budget quarterly to afford themselves more control over their resources. Whichever way a business prefers to budget, they have to base their decisions on real-time insights.
Real time budgeting is easier than you might think, however, and it’ll help your business to be more flexible and see more success in the year ahead.
Why Real Time Budgeting is a Must for Businesses in 2021
Traditional budgeting is done ahead of the financial year. The business chases successful outcomes measured against a set plan. However, change is the only true constant. As business objectives change throughout the year, set budgets are impacted. When a business changes its objectives, the cost of doing business changes too. This complicates a traditional budget.
Going forward, it’s going to be smarter for businesses to set budgets that anticipate future needs and meet ongoing demands comprehensively. Big data and business analytics can only do so much when it comes to responding to changing customer behaviours and forecasting for a business. A business must consider current conditions as well, like production delays and changes in demand. Businesses need to take a more flexible approach.
Rigid budgets are out: make way for real-time tracking and prepare to respond to emerging needs at the drop of a hat. With a real time approach to budgeting, a business can allocate resources and assess their efficacy on the run. Long-term budgeting still has a place in business, however. It defines a business’s priorities and supports its long-term goals. That said, real time budgeting is the big ticket for adaptable, successful business.
A recent article published by Diginomica states that every organisation should “retest its assumptions” heading into 2021. Organisation-wide collaboration and coordination is essential to gaining insight into all business areas and planning effectively for current and future challenges.
How is Real Time Budgeting Good for My Business?
Real time budgeting allows a business to be more flexible in several ways: for example, they’re able to pursue new opportunities, reclaim funds from projects that aren’t producing profit, and more. It also reduces the risk of funds being reallocated without being properly recorded, which solves the associated accounting challenges, too.
Real time budgeting necessitates that financial spend is tracked and resources are guided to where they’re needed in real time. This calls for software that gives key decision makers access to financial information, business analytics, and more so they can get a holistic look at the business’s current state. The best practice is to unify data and analytics with one integrated system, simplifying the reporting and decision making processes.
Real time budgeting creates opportunities for, and necessitates, real-time decision making. Coordination, communication and compromise amongst a collaborative team are key to making real time budgeting work. Overall, it’s a great strategy to make your business more flexible and generate better returns over time.