Ariel Menche’s Post

Four budgeting methods. 1. Traditional budgeting 2. Zero-based budgeting 3. Rolling budgets/forecasts 4. Beyond budgeting Let's learn more about each of them... TRADITIONAL BUDGETING Relies on historical data as a starting point. Assumes that current spending patterns are a reasonable basis for future budgets. May lack flexibility in adapting to changing business conditions Pro’s Simplicity: Easy to implement and understand. Historical data: Relies on past budgets as a starting point. Stable: Provides stability in budget planning. Con’s Rigidity: May need to adapt better to changes in the business environment. Potential for inefficiency: Can perpetuate wasteful spending. Limited focus on strategic goals: May not encourage innovation or cost reduction. ZERO-BASED BUDGETING Requires a thorough review of all expenses and activities. Promotes cost-consciousness and alignment with strategic goals. Encourages a more dynamic approach to budgeting. Pro’s Cost-consciousness: Forces a thorough review of all expenses. Aligns with goals: Encourages a focus on strategic objectives. Flexibility: Can adapt to changing business conditions. Con’s Resource-intensive: Requires detailed analysis of all expenses. Time-consuming: It can be labor-intensive to implement. Potential for shortsightedness: May cut essential long-term investments. ROLLING BUDGETS/FORECASTS Provides a more responsive approach to financial planning. Allows for regular adjustments to reflect changing circumstances. Can better align with long-term strategic goals. Pro’s Continual planning: Provides ongoing planning and forecasting. Flexibility: Adapts to changing circumstances more readily. Alignment with strategy: Can better support strategic goals. Con’s Resource-intensive: Requires continuous monitoring and adjustment. Complexity: This may be challenging to maintain, especially for smaller organizations. Potential for overemphasis on short-term results. BEYOND BUDGETING Encourages decentralization and empowerment of teams. Promotes a shift from budgets to performance measures tied to strategic objectives. Suggests a more flexible approach to resource allocation. Pro’s Agility: Promotes a more adaptive and responsive approach to financial planning. Empowerment: Encourages decentralization and employee empowerment. Focus on value creation: Shifts the emphasis from budgets to value-added activities. Con’s Cultural shift: Requires a significant cultural change in the organization. Lack of control: It may be challenging for some organizations to relinquish traditional control. Measurement challenges: Traditional performance metrics may need to align with this approach. Which of these four methods is your favorite? Any other methods that you would like to add? ---------- Enroll in our LinkedIn Learning course "Driving business impact for finance professionals" here: https://bit.ly/4a5fB9l

Lots of us are going through a budget cycle currently. might be late to make wholesale changes this year but it's important to understand alternative methods. Does anyone know of a company that has fully adopted Beyond Budgeting? All methods of budgeting can be made to work but my key takeaway is to make the output easy to understand and don't over-complicate the inputs so you never look at them again! #FinanceMaster thanks for the information. #fpa #finance

How much time do you spend per month on budgeting? Unless you're living under a rock, we all know that tax season is the time where all tax accountants are in "busy season". There's a boom in the demand for their services that lasts for only a portion of the year. Let's say you own a boutique CPA firm. You love busy season because that's when your revenue is highest. But what about the rest of the year? How can you manage a practice when you have such high seasonal fluctuations in revenue? That's where it pays to budget properly. Budgeting involves estimating your revenue and expense projections, and allocating capital resources to meet your financial goals. For a CFO, budgeting is more about strategic decision-making. You need to collaborate with all department heads to set realistic spending targets. When you know you're in a business subjected to seasonality, you need to decide how to use your resources in a way that will allow you to grow regardless of what season it is. CPAs still have to pay their bills whether they're in busy season or not. Some firms hire temporary workers to assist during the periods with higher demand. I'm sure you've all noticed the extra mall employees around the holiday season. That's a strategic decision made in order to handle the increased business, without being beholden to the increased expense once busy season is over. But still, some businesses don't have the luxury of knowing exactly when they will have high or low revenue. That's when it pays to include scenario analysis in your budgeting process, which can consider various scenarios of fluctuating revenue and designing a flexible budget to be able to handle most levels of demand. More on that in another post. Budgeting has a ton of benefits way beyond what meets the eye. Not only will you know what to expect, it instills financial discipline and accountability across departments. Budgeting informs important decisions and allows you to seize opportunities that drive profitability. On the flipside, failing to budget will make you a lot more reactive, instead of proactive. You will lack clarity on financial priorities and constraints. You may even miss out on opportunities to grow. As a best practice, you should regularly review and update your budgets based on actual performance and changing market conditions. You should also promote open communication among all stakeholders in the budgeting process to ensure your alignment. I've seen it in practice many times. When you embrace budgeting and spend the time getting it right, your job becomes a lot easier. When your job becomes easier, you become more efficient. And that's what good CFOs promote. #BudgetingforMallSantas

A highly useful post by Tom Schultz that highlights the different kinds of Fractional CFOs. Every company is different, so there is no "one-size-fits-all." What kind of Fractional CFO could help your business?

Great post for those trying to understand what a fractional CFO does. Capital Clarity CFO Services would fall mostly into #4. I posted earlier that there are two ways to grow: more customers or more valuable customers. We focus on the latter. There are many ways to make your customers more valuable. We analyze your finances to determine the highest value actions you can take to increase LTV the fastest. This is why our packages only make sense for companies looking to grow. There are many fCFO options available. Every business is different, but strong financial leadership is critical to grow and mitigate risk. #fractionalcfo #virutalcfo #financial #strategy #smallbusiness #growth

"Budgeting Basics & Beyond" by Jae Shim, Joel Siegel, and Allison Shim If one is looking to learn or revisit the basics of budgeting this is a comprehensive guide to understanding and implementing effective budgeting practices. The book covers various aspects of budgeting, from basic concepts to more advanced techniques, providing practical advice and real-world examples along the way. Highlights: >Fundamental Principles of Budgeting: The book begins by explaining the fundamental principles, including its importance in financial planning and decision-making. It covers key concepts such as forecasting, goal setting, and budget development >Types of Budgets: Next book explores different types of budgets, including operating budgets, capital budgets, cash budgets, and master budgets. Each type of budget serves a specific purpose and is used to allocate resources effectively >Budgeting Process: Read a step-by-step process for developing and implementing a budget. This includes gathering relevant data, identifying goals and objectives, creating a budget plan, and monitoring performance against the budget >Budgeting Tools and Techniques: Learn the various tools and techniques used in budgeting, such as variance analysis, sensitivity analysis, and activity-based budgeting. These tools help in analyzing financial performance, identifying areas for improvement, and making informed decisions >Budgeting for Personal Finance: In addition to business budgeting, the book covers the importance of budgeting in personal finance. It provides tips and strategies for creating a personal budget, managing expenses, saving for goals, and avoiding debt. This a surprise element! >Budgeting for Different Industries: Get insights into budgeting practices tailored to specific industries, such as manufacturing, retail, healthcare, and non-profit organizations. It discusses unique challenges and considerations for budgeting in each sector. Really liked that the authors included an industry view. >Performance Measurement and Evaluation: The book emphasizes the importance of performance measurement and evaluation in the budgeting process. It explains how to track key performance indicators (KPIs), analyze variances, and adjust budgets as needed to achieve financial goals >Budgeting Ethics and Control: Even if one's role is not that of an auditor a Finance pro always needs to keep his eyes & ears open for anything fishy. The authors address the ethical considerations and control mechanisms associated with budgeting. They highlight the importance of integrity, transparency, and accountability in the budgeting process to ensure fair and accurate financial reporting Would have loved the book to also cover the technology tools which can help is budgeting such as EPM and FP&A solutions Whether you're a beginner or an experienced financial professional, the book offers practical guidance and actionable insights to help you create and manage effective budgets #budgets #EPM

Budgeting for Growth: A Strategic Roadmap In my last post about budgeting, we explored the intricacies of financial freedom through a detailed budgeting checklist. Now, let's dive into the strategic side of budgeting—specifically, how it can be a powerful tool for fostering business growth. **1. Beyond Expense Reduction: Traditional views of budgeting often focus on trimming expenses. While cost control is crucial, modern budgeting is about more than just cutting back. It's a strategic process of resource allocation. **2. Resource Allocation for Growth: Budgets become growth catalysts when you strategically allocate resources. Identify areas where increased investment can yield higher returns. This could be in marketing, technology, talent acquisition, or research and development. **3. Investing in Innovation: Innovation is the lifeblood of growth. A well-thought-out budget allows you to allocate funds to innovative projects, helping your business stay ahead in a competitive landscape. **4. Technology Adoption: The previous post touched on automating finances. Investing in technology is a strategic budget move. Whether it's upgrading software, implementing new tools, or embracing automation, technology investments can lead to efficiency gains and, consequently, growth. **5. Talent Acquisition and Development: Your team is a key asset. Allocate budget resources for hiring and developing top talent. This investment not only improves your current operations but sets the stage for sustained growth. **6. Marketing and Expansion: A portion of your budget should be earmarked for marketing and business expansion. This might involve launching new products, entering new markets, or enhancing your brand presence. **7. Monitoring Key Performance Indicators (KPIs): As you allocate resources, establish KPIs to monitor the effectiveness of your investments. This data-driven approach ensures that budget decisions align with your growth objectives. **8. Adaptable Budgeting: The budgeting process shouldn't be static. Regularly review and adapt your budget to changing business conditions. An adaptable budget is a dynamic tool that guides growth, responding to market shifts and opportunities. **9. Communication and Collaboration: Budgeting for growth is a collaborative effort. Foster open communication within your team. Ensure that everyone understands the growth strategy and their role in achieving it. **10. Long-Term Vision: Growth-oriented budgeting isn't just about short-term gains. It's about nurturing a long-term vision. Consider how each budgeting decision aligns with your business's overarching goals. In conclusion, effective budgeting goes beyond the numbers. It's a strategic roadmap for growth. By embracing a forward-thinking budgeting approach, you're not just managing finances; you're propelling your business toward new heights. #BudgetingForGrowth #BusinessStrategy #FinancialManagement

Four budgeting methods. 1. Traditional budgeting 2. Zero-based budgeting 3. Rolling budgets/forecasts 4. Beyond budgeting Let's look at the pros and cons of each of them... TRADITIONAL BUDGETING Pro’s Simplicity: Easy to implement and understand. Historical data: Relies on past budgets as a starting point. Stable: Provides stability in budget planning. Con’s Rigidity: May not adapt well to changes in the business environment. Potential for inefficiency: Can perpetuate wasteful spending. Not strategic: This may not encourage innovation or cost reduction. ZERO-BASED BUDGETING Pro’s Cost-consciousness: Forces a thorough review of all expenses. Aligns with goals: Encourages a focus on strategic objectives. Flexibility: Can adapt to changing business conditions. Con’s Resource-intensive: Requires detailed analysis of all expenses. Time-consuming: Can be labor-intensive to implement. Potential for shortsightedness: May cut essential long-term investments. ROLLING BUDGETS/FORECASTS Pro’s Continual planning: Provides ongoing planning and forecasting. Flexibility: Adapts to changing circumstances more readily. Alignment with strategy: Can better support strategic goals. Con’s Resource-intensive: Requires continuous monitoring and adjustment. Complexity: This may be challenging to maintain, especially for smaller organizations. Potential for overemphasis on short-term results. BEYOND BUDGETING Pro’s Agility: Promotes a more adaptive and responsive approach to financial planning. Empowerment: Encourages decentralization and employee empowerment. Focus on value creation: Shifts the emphasis from budgets to value-added activities. Con’s Cultural shift: Requires a significant cultural change in the organization. Lack of control: May be challenging for some organizations to relinquish traditional control. Measurement challenges: Traditional performance metrics may not align with this approach. Which of these four methods is your favorite? Any other methods that you would like to add?

Four Budgeting Methods Original Content Creator: Anders Liu-Lindberg (give him a follow) ----- Four budgeting methods. 1. Traditional budgeting 2. Zero-based budgeting 3. Rolling budgets/forecasts 4. Beyond budgeting Let's learn more about each of them... TRADITIONAL BUDGETING Relies on historical data as a starting point. Assumes that current spending patterns are a good basis for future budgets. May lack flexibility in adapting to changing business conditions Pro’s Simplicity: Easy to implement and understand. Historical data: Relies on past budgets as a starting point. Stable: Provides stability in budget planning. Con’s Rigidity: May not adapt well to changes in the business environment. Potential for inefficiency: Can perpetuate wasteful spending. Limited focus on strategic goals: May not encourage innovation or cost reduction. ZERO-BASED BUDGETING Requires a thorough review of all expenses and activities. Promotes cost-consciousness and alignment with strategic goals. Encourages a more dynamic approach to budgeting. Pro’s Cost-consciousness: Forces a thorough review of all expenses. Aligns with goals: Encourages a focus on strategic objectives. Flexibility: Can adapt to changing business conditions. Con’s Resource-intensive: Requires detailed analysis of all expenses. Time-consuming: Can be labor-intensive to implement. Potential for shortsightedness: May cut essential long-term investments. ROLLING BUDGETS/FORECASTS Provides a more responsive approach to financial planning. Allows for regular adjustments to reflect changing circumstances. Can better align with long-term strategic goals. Pro’s Continual planning: Provides ongoing planning and forecasting. Flexibility: Adapts to changing circumstances more readily. Alignment with strategy: Can better support strategic goals. Con’s Resource-intensive: Requires continuous monitoring and adjustment. Complexity: May be challenging to maintain, especially for smaller organizations. Potential for overemphasis on short-term results. BEYOND BUDGETING Encourages decentralization and empowerment of teams. Promotes a shift from budgets to performance measures tied to strategic objectives. Suggests a more flexible approach to resource allocation. Pro’s Agility: Promotes a more adaptive and responsive approach to financial planning. Empowerment: Encourages decentralization and employee empowerment. Focus on value creation: Shifts the emphasis from budgets to value-added activities. Con’s Cultural shift: Requires a significant cultural change in the organization. Lack of control: May be challenging for some organizations to relinquish traditional control. Measurement challenges: Traditional performance metrics may not align with this approach. _____________________ Original Content Creator: Anders Liu-Lindberg (give him a follow)

Four Budgeting Methods Credits to Anders Liu-Lindberg, follow him for more practical finance content. ------ Here's the original post: Four budgeting methods. 1. Traditional budgeting 2. Zero-based budgeting 3. Rolling budgets/forecasts 4. Beyond budgeting Let's learn more about each of them... TRADITIONAL BUDGETING Relies on historical data as a starting point. Assumes that current spending patterns are a good basis for future budgets. May lack flexibility in adapting to changing business conditions Pro’s Simplicity: Easy to implement and understand. Historical data: Relies on past budgets as a starting point. Stable: Provides stability in budget planning. Con’s Rigidity: May not adapt well to changes in the business environment. Potential for inefficiency: Can perpetuate wasteful spending. Limited focus on strategic goals: May not encourage innovation or cost reduction. ZERO-BASED BUDGETING Requires a thorough review of all expenses and activities. Promotes cost-consciousness and alignment with strategic goals. Encourages a more dynamic approach to budgeting. Pro’s Cost-consciousness: Forces a thorough review of all expenses. Aligns with goals: Encourages a focus on strategic objectives. Flexibility: Can adapt to changing business conditions. Con’s Resource-intensive: Requires detailed analysis of all expenses. Time-consuming: Can be labor-intensive to implement. Potential for shortsightedness: May cut essential long-term investments. ROLLING BUDGETS/FORECASTS Provides a more responsive approach to financial planning. Allows for regular adjustments to reflect changing circumstances. Can better align with long-term strategic goals. Pro’s Continual planning: Provides ongoing planning and forecasting. Flexibility: Adapts to changing circumstances more readily. Alignment with strategy: Can better support strategic goals. Con’s Resource-intensive: Requires continuous monitoring and adjustment. Complexity: May be challenging to maintain, especially for smaller organizations. Potential for overemphasis on short-term results. BEYOND BUDGETING Encourages decentralization and empowerment of teams. Promotes a shift from budgets to performance measures tied to strategic objectives. Suggests a more flexible approach to resource allocation. Pro’s Agility: Promotes a more adaptive and responsive approach to financial planning. Empowerment: Encourages decentralization and employee empowerment. Focus on value creation: Shifts the emphasis from budgets to value-added activities. Con’s Cultural shift: Requires a significant cultural change in the organization. Lack of control: May be challenging for some organizations to relinquish traditional control. Measurement challenges: Traditional performance metrics may not align with this approach. ------- Follow Business Infographics to learn from the best visuals.