How can your team effectively navigate budget season without losing focus on profitability?
Managing post-COVID recovery plans in addition to regular day-to-day duties has left many finance departments feeling overextended. While the end of the year is always a busy time, budget season this year is proving to be particularly stressful. But it doesn’t have to be. The key is to avoid burdening yourself and your team with overly complicated tasks and processes as you navigate next year’s budget.
Nearly half of CFO respondents recently surveyed cite the need to streamline their overall budgeting processes. That’s why we’ve curated five tips for building your budget more efficiently so that you can focus on what matters most for your business.
You wouldn’t use a saw to hammer a nail. Choosing the correct tool for the job is critical to a successful outcome regardless of the task at hand. Tools increase efficiency and simplify processes. In the case of budgeting, the days of using disparate Excel spreadsheets are long over. Instead, the right tool is a business software solution that manages, tracks and forecasts your budget.
The ideal solution should enable consistency and collaboration, ensuring all team members work from the same template. It should also be easy to merge all department budgets and allow for modifications by management without having multiple versions. Lastly, it should have analytics capability so that your organization can easily measure goals and KPIs from a user-friendly dashboard.
Various paid and free tools exist to streamline your budgeting workflows, from basic budgeting to cash flow management. Check out Fundera’s list of the seven best business software solutions on the market.
Unfortunately, business expenses rarely decrease. So how do you account for ongoing expense increases in your budget process? Some of a company’s fluctuating costs are at least marginally within your realm of control and tend to be predictable, like wages and negotiable materials pricing. In contrast, you can’t influence broader economic factors, business trends, and industry pressures that drive expenses like fuel prices, taxes, and regulations.
Keeping an up-to-date list of the costs with recurring increases is essential to stay ahead of these increases and account for them in your annual budget. An excellent example to add to your running list is credit card processing fees. Visa, MasterCard, and American Express change the rules at least twice every year, driving interchange rates up significantly. This rate change can often be offset or avoided. But only if you know how the new rules affect your business and the kinds of credit card transactions you accept from your customers and clients. If you don’t document these fluctuating costs ahead of time, it may result in wasted hours of research every year as you try to determine the actual expense.
Speaking of Visa and Mastercard, make a note for your 2022 budget that these credit card networks will be boosting interchange rates for consumers who pay online or over the phone—so-called “card-not-present transactions.” Bloomberg reports that the fee hikes may be as much as 4.7% for a traditional Visa card.
When budgeting, getting input from organization members outside of management can give a clearer idea of upcoming expenses that may not otherwise be anticipated.
Crowdsourcing doesn’t just benefit real-time traffic reporting and innovations in potato chip flavors. Advantages of this approach for any organization include seeing the bigger picture and getting fresh perspectives. When budgeting, getting input from organization members outside of management can give a clearer idea of upcoming expenses that may not otherwise be anticipated. As Forbes advises, “it’s very important to build the right team to create your budget. It should not be created by one person.”
Sharing your budget with a broader team can also foster mutual ownership of goals. While this may sound like an additional task for an already busy budget team, resist the urge to build your budget in a silo. Crowdsourcing can save time in pinpointing areas of concern that would have been difficult to root out otherwise. As a bonus, with greater transparency comes an incentive for employees to limit spending and keep divisions under budget.
During the pandemic, and now in its wake, traditional budgeting processes were challenged by the uncertainty of a new economic landscape. As a result, many finance teams learned that a top-down rethinking of the budgeting process would be necessary. As McKinsey advises, “the business-as-usual budgeting process, with its traditional inputs and standard approaches, is no longer fit for the task.” A better budgeting process for next year and beyond includes stress-testing traditional assumptions, utilizing driver-based budgeting models, and ultimately focusing on the top priorities. If done correctly, with clear communication and objectives, a much more streamlined budgeting process is possible.
There’s no denying it. Cost reduction projects are challenging. So it’s not a surprise that time-strapped finance teams often turn away from fundamental cost reduction initiatives. But as the post-COVID economy takes shape, it’s incredibly risky to let costs get out of hand. Ensuring your business stands out from the competition relies on finding ways to sharpen your budget by cutting costs.
During budget season, one of the most viable ways to secure lower costs and avoid team burnout is to engage with seasoned experts who can address the problem on your behalf. An increasing number of these experts operate on a contingency or gain-share model. Meaning you won’t even be invoiced for their services until after the cost reductions have been realized. After which, their fees are only a portion of the money you are saving through their efforts.
Through a shared commitment to each other’s success, a gain-share partnership has the power to ensure that a predictable amount of savings are returned to your bottom line without generating an expense line item for the project. And even more importantly, you won’t be going it alone.
If your business is avoiding important cost-reduction projects, we’re here to help. We fix and monitor your existing merchant account, and we bring that money back to you. No need to change processors or add a project to your team’s already hectic workload. Schedule a consultation today.
Verisave is a third-party cost-reduction firm specializing in merchant accounts and credit card processing fees.
Verisave is not a payment processor, and is not affiliated with any processors, card brands, or banks.
Verisave has more than 20 years of experience optimizing and monitoring the credit card processing industry.