When it comes to looking ahead, budgeting past the quarter and even the year presents a bigger challenge. But once you see that it doesn’t have to be difficult and the benefits can far outweigh the effort, you’ll learn to love long-term budgets.
Why you love to hate long-term budgets
The biggest challenge of looking into the future of a company’s finances is unpredictability: business is never static.
Realistically, you can’t plan on company profits always trending up. On the other hand, failures and downturns are equally unpredictable, so you can never really know when you might head into the red. And while you can try to account for changes in your company, a carefully calculated long-term budget can’t predict how things outside the company like prices, markets and even the economy will fluctuate
Long-term budgets are also frustrating because short-term expenses require day-to-day attention. Costs for in-house supplies, tools and equipment – expected and unexpected, big and small – make the finish line of completing a long-term budget slip ever-further into the future.
How to stop the hate
Even with all the changes inside and outside of your company, planning for the future of your business is essential. To ease the long-term budget frustration, it’s important to think of long-term budgets not as fixed entities, but as flexible guidelines: a guiding light rather than a detailed roadmap.
To encourage this mind shift you can:
Be flexible. You’ll need this agility because budgets aren’t something you calculate once and store in your desk for the rest of the year. Budgets need to roll with the changes in your company meaning updates will be necessary.
Simplify procedures. If you’re going to make budgets successful, they can’t be cumbersome. While you need to ensure procedure is followed, make sure it isn’t a burden to get full approval on changes.
Insert your business goals. No matter the changes, budgets are pointless if they aren’t consistently focused on the long-term goals of your business. Work to consistent goals to provide continuity, but adapt how you get there as you go.
Use the cloud. By storing data in the cloud, it’s easier to access, change and review as you go. You can log expenses, prices and vendor information and make it immediately visibly to colleagues. They can then adapt long-term budgets in real time, rather than waiting for quarterly or yearly updates. This prevents long-term budgets from becoming so far removed from reality that they’re no longer useful.
Cloud services are also helpful to long-term budgets because they’re available on a subscription basis, meaning predictable operating costs rather than sporadic capital expenses.
Spreading the love
Creating, using and updating a long-term budget is a good habit to get into when you manage the finances of a company because you can look forward to short and long-term benefits.
Long-term answers to problems
Problems and obstacles arise every day and it’s usually up to the finance manager to determine how much the company can spend fixing it and how much it’s worth spending trying to fix it.
Instead of fixing a problem based on what the quarter looks like, you can find answers to short and long-term problems based on the long-term goals of the company: will the benefits of fixing it bring bigger rewards in the long term? Or is it a sticking paster for something larger that should be addressed to bring more benefits in the long term?
Resources for innovation and growth
When you have the big picture in mind, it’s also easier to sign off funds for projects and new ideas within the business with confidence .
You have the ability to use a long-term budget in your company and make the long-term goals of the business a reality. Even if you can’t predict everything, you can plan for success.