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Five reasons why business budgets fail and how to help them succeed

Five reasons why business budgets fail and how to help them succeed

10 min read

Business budgets are prone to failure if proper strategies aren’t followed. Here are 5 reasons why business budgets fail and simple ways to help them succeed.

1. Budgets are created once a year

In any business, there are constant, last minute changes to cash flow—in fact, your budgets could be out of date within a month of creation. This means you might waste time trying to hit outdated numbers.

Solution: Instead of spending weeks at a time preparing for the upcoming year, try creating a budget management system that can be easily updated on a month-to-month or regular basis using a rolling budget forecast, instead of a number you came up with nine months ago.

Consider these five budgeting methods when setting up a system for your business. 

2. Budgets drain your resources

Budgeting is often a time consuming task for business executives and their finance teams because it usually requires specialized knowledge to use, and extensive number-crunching. Not to mention if something changes drastically, the entire thing has to be redone to reflect any changes. 

Breaking down silos is another big issue, with companies looking for more collaboration and open communication between different people and teams. While it’s certainly true that you don’t want too many cooks in the kitchen (or too many hands on your budget!) you also don’t want to have to handle every single budget-related request yourself. 

Solution: Try finding a streamlined budgeting process, that is easily accessible to everyone, and can redirect that saved time and mental energy toward other things like your strategy and spending data.

3. Budgets are not realistic

Just because you create a budget doesn’t mean everyone in your organization is going to stick to it. Just as our personal budgets change, employees have costs that you may not have taken into account when planning. 

Solution: Try giving each department head a number to divide among their teams with restrictions that can be adjusted as need be. Check in on that budget each month or as often as necessary to ensure that no budget shortfalls are happening and that cash flow is where it should be.

Another great way to manage your budget is to actually involve your employees. Be transparent with the numbers and what you are spending money on for the business. The more they realize it’s not a bottomless pot of gold, the more they will feel accountable and want to help keep things in order.

A system like Divvy allows you to be proactive rather than reactive in budget planning. Budgets are tied to company cards, so they literally can’t overspend.

4. Budgets are housed on outdated systems

Using a traditional budget management system can be a downfall as they oftentimes are not linked to strategic planning and don’t often support the typical SMB market, often causing it to fail. On top of that, these traditional solutions are designed around out of date expense reports, account holders, and corporate credit cards. 

Solution: Finding a budgeting method that takes away those pressures, reduces expense reports, and allows for flexibility with company size is one of the best ways to ensure your budgeting process stays up-to-date. Divvy is constantly updating to ensure we stay on top of marketing trends, making it easy to access the funding you need, no matter the size of your business.

5. Budgets don’t focus on data

It’s especially true for smaller companies that are starting out with a budget for their business. They tend to look at all the hard numbers and known expenses they have for the year and begin building from there. 

Solution: Instead, they should focus on past spending or seek advice from similar businesses and gauge what they spend in a typical year. You should be able to see what your employees are actually spending in real time, and review all expenses for the coming month, adjusting totals and forecasts.

Budget failures are challenging and the traditional process of expense reports is slowly dying. If you want your company to be successful and stay successful, it’s essential that you adopt new systems and strategies to prevent any budget failures.

Check out our guide to ditch the old way of managing your budget and start building a better strategy. 

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