BALANCING THE BUDGET Seven ways businesses can make their annual budget work harder By Gary Chown ACIB MCIBS - Chartered Banker Director Commercial Banking NatWest Bank Gary.Chown@natwest.com
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hether you’re juggling the numbers as a small start-up or a medium/ large enterprise turning over millions, budgeting is never easy. And with the financial year-end approaching, identifying conclusions and trends from this current year’s spending can help mitigate problems in 2014-15. Taking time to look at where your company has overspent, wasted money or not invested enough is crucial. In a nutshell: • Calculate current costs and forecast future costs • Where should you invest? • Wasting time? Then you’re wasting money Have a clear view of every number Ian Preston, VP of Sales for UK and Ireland at financial software platform Adaptive Insights, believes SMEs must first and foremost ensure they have accurate figures to hand when planning out their budgets for the next year. He says: “Often businesses lack a comprehensive view of all the company spending or below line costs because they are budgeting on numerous spreadsheets which are not integrated. This results in numbers falling through the cracks.
“Companies need to utilise technology, which allows all employees to work from a single version of the truth, yet still drill down into granular detail.” Cut out wasteful spending and wasting time Wasteful and duplicate spending also needs to be slashed. At the end of 2014, the Government announced it had saved businesses £10bn over the past four years due to a war on red tape. Identifying where your company can take advantage of these changing regulations is a must. But looking at where you’re not spending enough is also key, says Morgan Davies, MD of Prime Accountants, who believes many smaller businesses waste time on doing jobs themselves that should be outsourced to professionals. He says: “If you’re spending hours on back office functions, you could be losing out on chargeable hours. Weigh up the cost against what it will ‘cost’ you to do it.” Tech time to know your IT spend Technology spending accounts for a large proportion of SME budgets, but according to Al Nagar, head of benchmarking at KnowledgeBus, not looking closely enough at what you are paying for things is a common mistake, especially on peripheral items that aren’t as closely scrutinised
as big ticket buys. He explains: “For SMEs, getting the best possible value for every penny you spend is crucial, from software systems to cabling. With new products and technologies emerging every day and huge fluctuations in pricing, our market research has found that
some organisations are paying margins of up to 673% on IT equipment. “SMEs can use benchmarking tools to secure the best prices for their IT equipment and to make sure they have the most up to date market information at their fingertips.” Check your cash flow and currency forecasts Adam Holden, Finance Director of RBS Invoice Finance, points out that companies need to use this year’s budgets to more accurately predict their cash flow. He says: “Putting effort into accurate forecasting gives you a solid baseline from which to assess your performance. Understanding how your business activities translate to cash flow needs allows you to identify pinch points well before they creep up on you.”