By Guest Author: Heather Smith
Budgeting certainly has its place in the business world, but not all businesses understand how to make a budget work for their needs. I spoke with some colleagues to learn their thoughts about budgeting and cost control when it comes to working with their clients. Here’s what they shared with me.
How do you explain budgeting and cost control to your clients?
Explaining how budgets and cost control work and how they can help a business is an important first step. Monika Stelzner, Director at Streamline Management, says a budget “focuses the mind [what] we want to achieve over the short term. It limits rash decisions and concentrates the mind on what is important.”
Simon Rowe, Partner at Milsted Langdon, explains budgeting and cost control to his clients in a way that doesn’t involve complicated business language: “Budgeting [is] ensuring that what you are about to embark on is worthwhile, [and] cost control [is] ensuring that it remains so.”
Is a budget right for your client?
There are different ways to create budgets and the most effective method for your client will depend on what they plan to do with the budget.
Michael Ford, CEO of Castaway Forecasting, believes “rolling forecasting with dynamic modelling is the heart of the business performance management system. Forecasting is the foundation stone for monitoring, managing and improving business performance.”
But a budget isn’t going to work for your client if they don’t know their regular operating costs. “Knowing your business’s essential running costs is vital to see if you are turning a profit, but also setting a realistic budget,” says Zoë Lihou, Client Accountant at De Garis Accounting Limited.
How can clients get the most out of a budget?
Looking at revenues, expenses, and net profits over the last few years helps establish trends in the business, while discussing what the client wants to achieve during the next year gets the client excited for the future.
Stelzner says, “staff need to understand the connection between the business strategy and the budget. This will then give them an insight into what costs support the strategy and which fall outside it. The budget sets parameters on what the costs should be.”
For Sherrell T. Martin, Chief Financial Solutions Officer at Nitram Financial Solutions, helping clients adhere to their budget involves regularly scheduled financial update meetings. “In these meetings, we go over actual numbers compared to the budget and make any necessary forecasting changes.”
To make the most out of budgeting and forecasting with your clients, it's important to know their business goals. If you decide a budget is right for them, then following up with regular financial review meetings is key in helping them make better business decisions based on their goals.