How to jump start your budget monitoring

With every new quarter, we repeat the same ritual: reviewing last quarter’s results and organizing the upcoming budget. It's an essential exercise that helps us take a step back from the daily routine, look ahead, and set new goals. The budget is fundamental to any company's financial wellbeing.

Contrary to popular belief, you don’t have to be a large corporation to benefit most from effective budgeting. From freelancers to small- and mid-sized businesses, everyone can benefit from establishing a precise budget and conducting routine budget monitoring. It gives you crucial tools to run your company, simply by optimizing resources.

Let's take a look at some simple ways to implement budget monitoring effectively.

At its core, budget monitoring is simply the difference between an established budget forecast, and the actual expenses/revenues at any given moment. To be effective, it should be carried out regularly. It helps us stick to our balance sheet forecast and lets us make strategic adjustments to our business, when necessary.

Budget monitoring is generally broken down into various segments: for the entire company, for specific departments/divisions, and by project.

Budget monitoring serves several purposes:

• for managing the use of a company's financial resources,
• to verify that revenues are collected (and following up when they aren’t),
• to compare discrepancies between forecasts and actual inflows/outflows, helping you plan for the future or react quickly in times of crisis.

Through budget monitoring, we can identify and correct problems. That's why top business schools teach it as an essential tool for decision-making.

By regularly comparing forecasts with actual results, it's easier to consistently monitor cash flow and to understand when to add more budget (or to cut costs).

Budget monitoring is critical when financing comes into play. It shows your lenders/investors that you’re rigorous when it comes to management, reassuring them that your projections are directly linked to tangible results.

Budgeting tends to be done annually. As for budget monitoring, nothing’s set in stone… We all need to set our own pace.

To get started, there’s one universal rule: monitor regularly. And monitoring really starts to get crucial at the end of a fiscal year.

The person responsible for budget analysis typically depends on the size of your company. If you’re self-employed or run a very small business, you probably don't have a dedicated department. In this case, it tends to fall under the business owner’s responsibility.

In larger companies, budget monitoring falls under the umbrella of the accounting/finance department. Management controllers and Chief Financial Officers (CFOs) are often most likely to be directly involved.

Outside of finance departments, budget monitoring responsibilities tend to be spread across operational departments, effectively democratized to enable reactivity and autonomy.

When it comes to comparing your budget forecast with your actual revenues and expenses, visualizing your financial data is key.

Start by organizing your financial information into easy-to-read dashboards. This will give you a clear, real-time snapshot of your financial health.

Next, focus on calculating and tracking key financial ratios.

These should include turnover ratios to understand your sales efficiency, available cash flow to measure your company’s liquidity, and the ratios between current and upcoming liabilities to assess your ability to meet future obligations.

At a glance, you'll be able to access key financial data for your company, freeing you up to make informed decisions.

The annual budgeting process should be seen as an opportunity to translate your company's strategy into financial metrics.

To ensure that team members develop a sense of ownership, it's best to break your strategies down into trackable, quantifiable objectives.

One commonly used approach is the SMART method, which allows you to set objectives that are specific, measurable, achievable, realistic, and time-bound.

Financial tools have evolved a ton in recent years, and financial management has never been easier.

These tools are built to ensure accounting compliance, freeing you from time-consuming, low value-added tasks via automation. This provides a central, reliable source of financial data, updated in real-time.

Choosing the right financial management software is key to facilitating budget monitoring.

To pick the right tools, prioritize simple dashboards to monitor your incoming/outgoing cash flow, as well as expense tracking tools for your teams.

Centralizing your financial management with Qonto lets you:

• Define your budgets by team, directly in the app with just a few taps, to automate expense allocations to fit their corresponding budget.
• Track the evolution of an allocated budget, at a glance and in real-time.
• Control payment card limits and team budgets, instantly, and be alerted before going over budget.
• Involve department heads in budget monitoring.

Budgets are more than just financial tools; they should be understood as communication tools as well. For operational departments to embrace the company's strategy, it's important to collaborate when defining objectives, building a bridge between finance and operational teams. Then you’ll need to make sure that these objectives are understood and followed in every team, up and down the corporate ladder.

This collaborative approach fosters realistic deadlines - making objectives more achievable - empowering operational team members. You can also delegate budget monitoring responsibilities, rendering them “internal” at your various departments.

Far from being simple financial tools, budgets are key to managing entire companies. They’re essential for decision-making, helpful when communicating, and fundamental in motivating teams. Consistent budget monitoring safeguards the business’ financial health, putting you on track to reach your goals.

With Qonto, define budgets and give teams autonomy, while maintaining control.