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Selecting the right budgeting approach can greatly influence our organization's financial health and strategic direction. Traditional Budgeting relies on historical data and provides stability but may lack flexibility. Zero-Based Budgeting starts from scratch each cycle, promoting cost-consciousness and strategic alignment, though it's resource-intensive. Rolling Budgets offer continual updates and flexibility, ideal for adapting to changes but requiring constant monitoring. Beyond Budgeting advocates for a decentralized, adaptive approach focusing on value creation, yet demands significant cultural shifts. Each method has its strengths and challenges; the choice depends on your organization’s unique needs and goals. 🌟 Which budgeting method do you prefer for your organization? #Budgeting #CFO #FinancialPlanning #BusinessStrategy #FinanceManagement

Four budgeting methods. Which one would you choose? 1. Traditional budgeting 2. Zero-based budgeting 3. Rolling budgets/forecasts 4. Beyond budgeting 89% have a budget for 2024. 59% have implemented rolling forecasts. 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 the past as a starting point. Stable: Provides stability in budget planning. Con’s Rigidity: Doesn't adapt to changing circumstances. Potential for inefficiency: Leads to wasteful spending. Not strategic: Limits innovation or cost reductions. ZERO-BASED BUDGETING Pro’s Cost-consciousness: Forces a review of all expenses. Aligns with goals: Drives a focus on strategic objectives. Flexibility: Can adapt to changing business conditions. Con’s Resource-intensive: Requires analysis of all expenses. Time-consuming: It can be labor-intensive to implement. Possible short-termism: May cut long-term investments. ROLLING BUDGETS/FORECASTS Pro’s Continual planning: Ongoing planning and forecasting. Flexibility: Adapts to changing circumstances more readily. Alignment with strategy: Better support of strategic goals. Con’s Resource-intensive: Needs ongoing overview and changes. Complexity: This may be challenging to maintain. Short-termism: Risk of overemphasis on short-term results. BEYOND BUDGETING Pro’s Agility: Adaptive and responsive financial planning. Empowerment: Employee empowerment and motivation. Focus on value creation: From output to outcomes. Con’s Cultural shift: Requires a significant cultural change. Lack of control: Challenging to relinquish control. Measurement challenges: Doesn't fir normal KPIs. Which of these four methods is your favorite? Any other methods that you would like to add? ————— 🧑💼 I'm a partner at Business Partnering Institute 🆘 Need immediate help in your finance team, call us! 🤝 We help increase the influence of your finance team 🔔 To see more content, hit the bell on my profile 🧑🎓 Enroll in our LinkedIn course: https://bit.ly/4a5fB9l 📻 #FinanceMaster podcast: https://bit.ly/3NLSt73 📺 Follow us on YouTube: https://bit.ly/4bSBut6 📢 Join our WhatsApp channel: https://bit.ly/3WWGOrc 📄 Check out all our templates and cheat sheets here: https://lnkd.in/eC_zuCU4

7 Approaches to Budgeting explained in a simple way... ——— 𝙍𝙚𝙨𝙤𝙪𝙧𝙘𝙚𝙨: 📕Courses → https://bit.ly/FMECourses 📘Email → https://bit.ly/FMEEmail ——— 𝟭. 𝗦𝘁𝗮𝘁𝗶𝗰 𝗕𝘂𝗱𝗴𝗲𝘁 Based on the assumption that the company's revenues and expenses will remain constant over a given period of time. Can be useful for companies that operate in stable environments where there is little fluctuation in revenues and expenses. 𝟮. 𝗙𝗹𝗲𝘅𝗶𝗯𝗹𝗲 𝗕𝘂𝗱𝗴𝗲𝘁 Based on the assumption that the company's revenues and expenses will vary based on the level of activity or output. Can be useful for companies that operate in dynamic environments where there can be significant changes in revenues and expenses. 𝟯. 𝗭𝗲𝗿𝗼-𝗯𝗮𝘀𝗲𝗱 𝗕𝘂𝗱𝗴𝗲𝘁 Based on the assumption that the company should start from scratch and justify every expense. Can be useful for companies that want to closely control their expenses and ensure that they are being used in the most efficient and effective way possible. 𝟰. 𝗥𝗼𝗹𝗹𝗶𝗻𝗴 𝗕𝘂𝗱𝗴𝗲𝘁 A rolling budget is regularly updated to reflect changes in the company's revenues and expenses. Can be useful for companies that operate in dynamic environments where there can be significant changes in their revenues and expenses. I like to think of the Rolling Budget as a "live playbook" for what's next. 𝟱. 𝗧𝗼𝗽-𝗱𝗼𝘄𝗻 𝗕𝘂𝗱𝗴𝗲𝘁 Created by top-level managers and then allocated to lower-level managers. Allows for a high-level view of the company's financial goals and how they will be achieved. Can be inflexible and may not take into account the specific needs and challenges of individual departments. 𝟲. 𝗕𝗼𝘁𝘁𝗼𝗺𝘀-𝘂𝗽 𝗕𝘂𝗱𝗴𝗲𝘁 Created by (or with guidance from) lower-level managers and then consolidated into a company-wide budget. Allows managers to take into account the specific needs and challenges of their departments or divisions. Can be less aligned with the company's overall financial goals and objectives, and may not provide a comprehensive view of how the company's resources are being used. 𝟳. 𝗛𝘆𝗯𝗿𝗶𝗱 𝗕𝘂𝗱𝗴𝗲𝘁 Combines elements of both bottom-up and top-down budgeting. Allows for flexibility and customization at the lower levels, while still providing top-level managers with oversight and control over the company's overall financial goals and objectives. Can be more complex and time-consuming to implement, and may not provide the level of control and visibility that some companies may need. 𝗧𝗵𝗲 𝗕𝗲𝘀𝘁 𝗔𝗽𝗽𝗿𝗼𝗮𝗰𝗵? Depends on the specific needs and goals of each individual company. It is equally important to regularly monitor and adjust the budget as needed to ensure that it remains relevant and effective (often called the Rolling Forecast). 𝗪𝗵𝗮𝘁 𝗜 𝘀𝗲𝗲 𝗺𝗼𝘀𝘁 𝗰𝗼𝗺𝗺𝗼𝗻𝗹𝘆: The Hybrid Approach followed by a Rolling Forecast.

Four budgeting methods. Which one would you choose? 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: It may need to adapt better 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: It 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: 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 Learn more about the latest trends in finance and accounting by listening to the FinanceMaster Podcast here: https://bit.ly/3NLSt73 Or download guides and cheat sheets about finance and accounting here: https://lnkd.in/eC_zuCU4

Budgeting isn't restricting – it's about making your money work for you, not the other way around. Here’s how to transform budgeting into an empowering tool. 1. Align Budget with Business Vision: ↳ Your budget should reflect your business goals - direct your funds towards areas that will most effectively drive your business forward. Whether it’s expanding operations, increasing marketing efforts, or investing in R&D, ensure your budget supports these objectives. 2. Use Budgeting for Informed Decision-Making: ↳ A well-planned budget is a roadmap for decision-making. It helps you determine where to cut costs, when to invest, and how to navigate financial challenges. 3. Embrace Flexible Budgeting: ↳ The business world is dynamic, and your budget should be too. Be prepared to adjust your budget in response to market changes, new opportunities, or unexpected challenges. Regular budget reviews allow you to adapt and respond quickly, keeping your business agile and resilient. 4. Utilize Budgeting Tools for Efficiency: ↳ Modern budgeting software can streamline the process, offering insights into spending patterns, forecasting, and financial health. 5. Foster a Budget-Minded Culture: ↳ Cultivate an environment where every team member understands the importance of budgeting and is committed to the financial health of the business. ________________________ If you’re looking to transform your budgeting process  to a strategic asset, Revelo Consulting is here to guide you. Our expertise in financial planning and budget management can help turn your budget into a tool that drives your business’s growth and success. If you found this helpful, consider resharing ♻️ and follow for more content like this.

Four budgeting methods. Which one would you choose? 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: It may need to adapt better 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: It 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: 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? ---------- 🧑💼 I'm a partner at Business Partnering Institute 🆘 Need immediate help in your finance team, call us! 🤝 We help increase the influence of your finance team 🔔 To see more of my content, hit the bell on my profile 🧑🎓 Enroll in our LinkedIn course: https://bit.ly/4a5fB9l 📻 #FinanceMaster podcast: https://bit.ly/3NLSt73 📄 Check out all our templates and cheat sheets here: https://lnkd.in/eC_zuCU4

Choosing the right budgeting method depends significantly on the organization’s size, industry, culture, and specific financial management needs. Each of the four methods you’ve outlined has distinct advantages and challenges. Here’s a brief analysis to help decide which might be best suited for different scenarios: 1. Traditional Budgeting • Best for: Organizations in stable industries with predictable revenue streams and expenses. • Why choose: It’s straightforward and familiar, making it easier for stakeholders to understand and follow. 2. Zero-Based Budgeting • Best for: Organizations looking to tightly control costs, undergoing significant changes, or in industries where cost efficiency is a competitive advantage. • Why choose: It ensures that spending is necessary and aligned with strategic goals, potentially leading to significant cost savings. 3. Rolling Budgets/Forecasts • Best for: Dynamic industries where market conditions frequently change, such as technology or fashion. • Why choose: It allows continuous adaptation to the market, making financial planning more responsive and less likely to be caught off-guard by changes. 4. Beyond Budgeting • Best for: Agile organizations that prioritize innovation and rapid response to market conditions, such as startups or companies in highly competitive environments. • Why choose: It fosters a culture of flexibility and empowerment, which can drive faster responses to opportunities and challenges. Additional Method to Consider: Activity-Based Budgeting (ABB) • Description: Focuses on business activities and allocates funding based on the cost of these activities. It’s useful for understanding the cost drivers and profitability of different business segments. • Pro’s: Increases cost visibility and helps identify inefficiencies. • Con’s: Can be complex to implement and requires detailed activity-level data. Personal Preference: If I were to choose, my preference leans towards Rolling Budgets/Forecasts for several reasons: • Adaptability: It offers the flexibility to adapt to changes without waiting for the next budgeting cycle. • Strategic Alignment: Continuous planning helps keep the organization’s strategies and financial plans aligned. • Proactive Management: It allows for proactive rather than reactive management, which is crucial in fast-paced industries. Ultimately, the choice of budgeting method should align with the organization’s strategic objectives, operational needs, and the external environment in which it operates. It’s also worth noting that some organizations might benefit from a hybrid approach, integrating elements from different methods to suit their unique needs. For instance, combining traditional budgeting for stable departments and rolling forecasts for dynamic units could harness the strengths of both methods.

Which budgeting method are you using?

💰 Your Ultimate Budgeting Guide💰   Learn the keys to smarter money management and achieve your financial goals!   1️⃣ What is Budgeting?   Budgeting is a strategic financial planning and management process used to set financial goals, allocate resources, and guide the organization's financial decisions over a specific period, typically a fiscal year.   2️⃣ Key Budgeting Aspects   a)    Financial Planning:   b)   Resource Allocation   c)    Performance Evaluation   d)   Risk Management   e)   Decision-Making f)     Communication   3️⃣ Budgeting Methods   The choice of a budgeting method depends on the company's objectives, industry, and willingness to adapt to changing business conditions. Companies often use a combination of several methods to create a budgeting approach tailored to their specific needs.   1. Traditional Budgeting:   Traditional budgeting involves using historical financial data as a basis for creating the budget. It often includes incremental adjustments to the previous year's budget.   2. Zero-Based Budgeting (ZBB):   Zero-based budgeting requires departments to build their budgets from scratch, justifying every expense. It starts with a budget of zero, and each expense must be justified.   3. Rolling Budget (Continuous Budget):   Rolling budgets involve continuously updating the budget, typically on a monthly or quarterly basis, by adding a new budget period as one period expires.   4. Activity-Based Budgeting:   Activity-based budgeting links budgeting to the activities and initiatives of the company. It allocates resources based on the planned activities and their expected costs.   5. Beyond Budgeting:   Beyond Budgeting is a decentralized approach that challenges the traditional budgeting process, emphasizing adaptive and flexible management in response to changing conditions.   6. Capital Budgeting:   Capital budgeting focuses on budgeting for long-term investments and capital projects, such as equipment purchases, facility expansions, and infrastructure improvements.   4️⃣ Key Benefits   1. Financial Control: It helps companies maintain control over their finances, preventing overspending and financial instability.   2. Goal Achievement: Budgets allow businesses to work toward strategic objectives, such as revenue targets, profit margins, and growth initiatives.   3. Resource Optimization: By allocating resources efficiently, companies can optimize their operations and investments.   4. Performance Monitoring: Budgets provide a basis for measuring performance and making informed decisions to meet financial goals.   5. Investor and Stakeholder Confidence: Transparent budgeting practices can enhance investor and stakeholder confidence in the company's financial stability and growth prospects.   6. Regulatory Compliance: In many industries, companies are required to adhere to budgetary guidelines and demonstrate financial responsibility to regulatory authorities. Follow us for more educational content! 📈 #budgeting

>>>The Art of Crafting a Solid Budget: Choosing the Right Method for Success. In today's dynamic business environment, crafting a robust budget is crucial for setting the foundation for success. A well-structured budget not only outlines financial expectations but also serves as a roadmap for achieving strategic goals. When building a master budget, choosing the right method whether it's incremental budgeting, zero-based budgeting, value proposition budgeting, or activity-based budgeting—can significantly impact the effectiveness of financial planning. Key Considerations for Crafting a Budget *** Setting Objectives and Objectives and Key Results (OKRs): The first step in budgeting is to clearly define the objectives and objectives and key results (OKRs) that will measure qualitative and quantitative success. By aligning the budget with these goals, companies can ensure that every dollar spent contributes to achieving strategic objectives. Choosing the Right Budgeting Method: *** Incremental Budgeting: Builds upon the previous year's budget by making incremental adjustments. It's straightforward but may perpetuate inefficiencies. *** Zero-Based Budgeting: Starts from scratch, requiring justification for all expenses. This method can be thorough but time-consuming. *** Value Proposition Budgeting: Focuses on ensuring that all expenditures contribute to the value delivered to customers. It emphasizes cost efficiency and value creation. *** Activity-Based Budgeting: Allocates funds based on the activities that drive costs. It offers a detailed view of cost drivers but requires a deep understanding of business processes. Budget Approaches: *** Top-Down Approach: Senior management sets the budget and allocates resources. This approach provides clear direction but may lack input from all levels of the organization. *** Bottom-Up Approach: Individual departments propose their budgets, which are then consolidated. This method encourages engagement but may lead to discrepancies in resource allocation. *** Negotiated Budget: Combines elements of both top-down and bottom-up approaches, facilitating a balanced and inclusive budgeting process. By carefully considering these aspects, companies can craft a budget that not only aligns with their strategic goals but also promotes financial discipline and accountability. A well-crafted budget is more than just a financial plan; it is a strategic tool that drives the organization's growth and success. In conclusion, whether you are a startup or an established enterprise, choosing the right budgeting method and approach can make all the difference. Let's build a future of financial excellence together!