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Budgeting and forecasting on a small business budget

Financial Services Writer

Traditional budgeting and forecasting methods don't meet the needs of today's fast-moving businesses.

While examining treasury systems aimed at corporations with $100 million or more in annual revenue, Gartner analysts concluded that "competitive business environments require that organizations find new ways to reduce costs while simultaneously improving their ability to manage performance." The technology research firm advocates for strategic budgeting and forecasting that dynamically adapts to changing business conditions.

However, small- and medium-sized businesses (SMBs) do not always have the budgets for large finance teams and the latest technologies, making it a struggle to keep up with these constant financial shifts.

Budgeting and forecasting for smaller companies

Fortunately for companies that have yet to reach $100 million, a number of software-as-a-service (SaaS) financial systems are available by subscription.

As Rebecca Grant writes on VentureBeat, "For companies of all sizes, the process of selecting quality financial services software has replaced the process of hiring an accountant or an HR professional. This is particularly true for smaller startups that may not be able to pay a full salary but can afford a small monthly subscription fee for software."

These solutions are designed for business owners who are putting in double time serving as their organization's accountant. The services often offer mobile app options, further increasing their convenience.

While larger firms can take advantage of treasury management systems (TMSs) for budgeting, forecasting and reporting, these solutions often provide more power and features than small firms can use.

A survey by gtnews, a publication of the Association for Financial Professionals, found that while larger companies "use TMS as decision support tools ... smaller companies do not necessarily have the internal structure and organization that will enable them to fulfill the greatest benefits of TMS."

https://kapost-files-prod.s3.amazonaws.com/uploads/direct/1445441421-13-5987/BudgetingForecasting_Blog.jpgImproved budgeting may require more staff

To achieve greater efficiency, SMBs may have to temporarily add staff or rely on system vendors to streamline data flows and develop more straight-through processing. This, in turn, can reduce or eliminate manual processes.

One of the primary goals of a budgeting system in any size organization is cash management. For larger firms that have been in business for decades, cash problems may only be an outcome of a financial crisis when firms are shut out of bank credit. For smaller firms, however, cash management is always a concern. Owners and senior executives want to know how much cash they have, where it is and in which currencies.

With volatile markets, looming Federal interest hikes, a fluctuating RMB and monetary stimulus in Europe, the latest financial management systems can help a company not just survive, but prosper.

Advanced analytics support dynamic budgeting

Because of this volatile market, however, few companies can develop an annual budget and follow it strictly over the next 12 months. Fortunately for CFOs, there are powerful tools that can help companies of all sizes cope with these market changes. Valuable tools include everything from big data and fast, in-memory computing to GIS-generated location information and data visualization to show what is happening in the world.

In particular, firms can apply business intelligence software to better understand the data and run scenarios for deeper analysis.

"Just because you know where you've been, it doesn't necessarily mean you know where you're going. In today's volatile market, where adverse events can occur out of nowhere, top performers must tweak their plans, budgets and forecasts to generate even greater accuracy," writes Nick Castellina, research director for business planning and execution at Aberdeen. "By utilizing advanced analytics, top performers can identify trends and connections between data, create smarter algorithms and understand the lag between their actions and their actions' impact."

Take a free trial powerered by IBM Planning Analytics, and see how today's advanced analytics can transform your strategic budgeting and forecasting, and help drive financial efficiency and performance across the enterprise.