Monday, 14 April 2014

Dynamic Budgeting – The good, the average & the ugly

Your budget should be one of the most important documents guiding your business decisions; but to get the most out of it, it needs take into account multiple “what if” scenarios.

A dynamic budget is based on a solid budgeted fiscal set which can then be extrapolated for multi-year budgeting using assumptions. These assumptions are set by you according to the elements that your business faces and should account for multiple scenarios from optimistic through neutral to pessimistic and be able to be applied at cost centre and account level.

Changing markets and inflation, new hires and salary increases, depending on your business something as seemingly unimportant as the weather temperature; all changes from within or outside your organisation can have a major impact on your bottom line.

Considering the tremendous affect any number of events could have on your budget and your organisation's financial health, being able to view versions of your budget that reflect the good, the neutral or the ugliest eventualities will give you a far fuller and clearer picture of where you are headed.

"What-if" assumptions can show you the companywide implications of anything that can potentially affect your business, allowing you to account for these developments. Assumptions can be set up and adjusted as and when needed to calculate specific increases and decreases per year or per period.

The resultant dynamic budget fiscal set with all the appropriate security and settings, can then be shared with end users for their input and commentary, to ensure you get a view from those on the ground. Their feedback might be that your assumptions are far off base from the realities they are facing and you will then be able to go back and make adjustments accordingly.

Dynamic budgeting allows you to prepare for almost anything your business might be faced with, allowing you to anticipate and plan for your business’s future.



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