Best practice #1: Share the budget with your teams to avoid overspending
What happens if you’ve built a solid budget, only to find that your company still manages to go well above the set allowance?
Overspending is less an indication of bad faith on behalf of your employees and more an indication of lack of communication .
Which is why, once you set out your budget with your administrative unit, it’s important to communicate this to all your teams. It can be as simple as circulating a simple document that outlines the allotted spending for each project.
That way, everyone has access to the same information and can spend with full awareness and consideration of the budget.
Best practice #2: Automate managing allotted budgets
Many a business owner has wasted precious time combing over company expenses with a fine-tooth comb, keeping a close eye on statements in order to catch potential budgetary slip-ups.
Not only is playing investigator time-consuming, it can be anxiety-provoking. Trying to manually reconcile several hundred bank transactions isn’t exactly the easy life.
Thankfully we live in a time where there are multiple tools on the market that can automate expense tracking in order to avoid overspending.
Take Qonto, for example. In addition to your primary account, we give you the option to set up multiple accounts.
This feature allows you to open a sub-account for each project or team, so you can clearly separate expenses thematically and gain more visibility over the state of your budget.
💡 Let’s take an example to better understand how multiple accounts can support your budget management.
Imagine you’re the head of an SME. You’ve set aside €15,000 for your Marketing department and €10,000 for your Sales department.
You can make your life easier by opening a sub-account for each department (one for Marketing, one for Sales) and deposit the corresponding budgeted funds in each account.
By doing this, you’ve already categorized your expenses, set up good visibility over your spending and can (truly) avoid overspending.
Best practice #3: Examine and revisit your budget often
Sometimes things don’t work out as expected, as 2020 clearly showed us.
Without going so far as to worry about a future pandemic, the market you operate in is bound to fluctuate (due to the variability of available raw materials, or global logistical issues, etc.).
Plan accordingly. Avoid overspending by revisiting the relevance of your budget regularly - every trimester, for example - in light of cyclical or structural changes.
What you’re doing here is periodically evaluating whether your estimates really hold up to your real revenue and spending, and course-correcting if it’s not the case.
This is a common practice for many business, but even moreso since the recent health crisis. In finance-speak we call this a rolling forecast.
Rolling forecasts allow you to promptly react to unexpected issues (by pushing certain projects further out, for example) to avoid cash flow issues later in the year.