Steps in the budgeting process: Priorities for CFOs in 2023

Take stock of the year by identifying key issues or areas of improvement

The year is almost over – you made it. Now it's time to take stock of the past several months and see what worked and what didn't. The past is an insightful teacher, so look back at your financial performance from last year to identify trends and patterns. Analyze why things changed for the better or for the worse. What can you do differently to improve performance?

• Review your strategic plans. Make sure you have the right strategies in place for your business and take into account any changes in market conditions or trends over the past 12 months.
• Review your budgeting process. Have you been able to set spending budgets that align with your strategic plans? Are they still relevant? Do they need adjusting? How can they be improved?
• Review compliance targets. For example, do you know what compliance targets will be coming up during the next 12 months? Are there any regulatory changes that will affect your business?

Improve the quality of your financial reporting

The past few decades have seen several high-profile corporate scandals, some of which you might recall from recent news stories. And as a whole, many CFOs are under pressure to improve internal controls and provide more accurate and transparent data to investors. A major solution is to improve the quality of your financial reports. You understand that it’s not just about getting it right, but it’s also about producing proof that you got it right.

One practical way to demonstrate this is by increasing transparency around key business metrics. Making sure that performance metrics are clearly communicated across departments and teams so that everyone understands how they contribute to the company's overall goals. This will be crucial as you prepare for the upcoming budget year. This way, employees at every level in your company understand what success looks like, not just the higher-up execs.

Focus on productivity by streamlining and automating accounting and finance processes

One of the most pressing concerns among CFOs is finding ways to increase efficiency and productivity in areas where manual processes currently take place. CFOs recognize that automation will help them save money and increase organizational agility, which can lead to greater profitability down the road. Choosing the right spend management solution, like Payhawk, can help you integrate with other vital applications (such as NetSuite, QuickBooks, etc.). And will help you increase efficiency and gain better financial governance as a CFO or financial leader.

Reduce manual tasks by investing in automation software that simplifies financial management. A spend management solution paired with an accounting ERP system with business intelligence capabilities that can provide real-time insights into your business operations. It should provide you with a better understanding of your company's key performance indicators (KPIs) like cash flow and profitability.

In addition, when it comes to streamlining your accounting processes, the right software can help you automate manual tasks such as visibility on subscriptions, reimbursement expenses, and access to company spend so that you can focus on more strategic initiatives like revenue growth or cost savings. An intelligent software system ensures that your financial reports are error-free. This can save you both time and money in the long run.

Control how much is allocated into each category of your business budgets
For many SMEs, budgeting can be more of an art than a science. There are so many moving parts and variables that it's difficult to pinpoint exactly how much money will be spent in each department or category. This makes it hard to accurately plan ahead and ensure that your business continues to operate at peak efficiency and profitability.

One way to make budgeting easier is by utilizing software to automate your accounting and finance processes, like Payhawk's smart expense management tool. Our software allows you to easily create business budgets for different departments or categories within your company, including receipt and invoice accounting data. We also provide Visa business debit and credit cards for employees and company teams. These cards allow you to track expenses and monitor employee spending while providing peace of mind that they'll always have access to funds when they need it.

Strategic planning and forecasting

Although we're in a much better position than we were during the Great Recession of 2008, there are still economic uncertainties ahead. And in the midst of talks of another pending recession, there is no guarantee that all will go smoothly. As a financial leader, you understand your role requires you to think big but also be nimble enough to keep up with changing market conditions. Also while taking into account any other potential risks (from operational risks to increase in competition) to make sure you have enough money in reserve if they should arise.

It's also easy to fall into the trap of focusing on improving margins instead of growing revenue. While growing sales is important, so is maintaining profitability levels by keeping costs low and controlling expenses through automated strategic planning.

Implement proactive zero-based budgeting

Zero-based budgeting (ZBB) is a method of accounting that requires managers to justify every money they spend. It enforces them to make decisions based on what they need, not what they want. With a zero-based budget, you'll have more spend control over how money is spent, which will lead to better use of funds and more efficient operations overall.

Zero-based budgeting stipulates that every expense is justified before every fiscal year begins. Most companies are already using this process for planning purposes. And there are others who even require managers to reallocate a certain amount of their budget each quarter or year if the spending does not align with the current budget goals. This is enforced to provide an objective way to evaluate spending budgets based on actual performance instead of historical projections or estimates.

Takeaways

Budgeting can be both helpful and gratifying when done correctly. Creating an annual business budget is one of the most important steps in planning for the success of your company in the coming year. As part of this process, you'll want to look at trends from the previous years, so you can set realistic goals for the coming year.

Payhawk provides increased visibility into your business operations. With real-time data access at your fingertips, you can track variable costs and company spend as it happens without having to dig through piles of paper records or manually enter information into spreadsheets. You can identify trends in sales performance by region or product category so that you can make informed decisions about future growth opportunities for the new year.

Find out more about how our expense management software can help you plan your business budget for the new calendar year, book a demo.