It’s proven–understanding your finances allows for better planning and operation. But what is the best option for your business? At Froehling Anderson, we can help businesses determine what budgeting style suits their needs. We offer five different options to fit any situation.
“SALY”-style budgeting is good for businesses whose cost drivers do not change from year-to-year. This budget takes last year’s numbers and tweaks them for next year, accounting for growth and new departments.
Although this is by far the simplest budget, it has some drawbacks. Inefficiencies from the previous year can roll over into the new budget. This plan can also ignore external drivers like inflation. Our financial specialists can help avoid these challenges or suggest a different budget style for your business when meeting with you.
Zero-based budgeting excludes last year’s numbers and builds from the ground up. This approach is effective for containing costs and ensuring departments account for every expenditure. Plus, eliminating any unnecessary financial drains to the company is good when money is tight.
While this budget puts a microscope to your finances, it is time-consuming. The cost of the extra work might not make this a viable solution. Most businesses only do zero-based budgeting occasionally to make sure they are running efficiently.
A rolling budget does away with the yearly financial forecast and has companies forecast at least once a month. These budgets have become increasingly popular for their ability to financially forecast and react quickly.
This can be a powerful tool, but switching could be costly. More data needs to be collected to continuously forecast, and more time dedicated to monthly budgeting work. This lowers your year-end time but increases your cost. Froehling Anderson’s finance team can help you plan how to best implement rolling budgets and what systems to use to make this process easier.
Budget By Department
Looking at each department and setting budgets individually can help control your costs by area. Much like zero-based, this can reign in spending. Department-based budgeting can motivate employees to meet goals. On the other hand, it could encourage budget padding. Sitting down with a specialist from Froehling Anderson can help determine how to plan department spending.
None of these plans fit your business? Not to worry! At Froehling Anderson we know that a single category will never fit perfectly. We often recommend a hybrid budget so we can see what elements of each plan work best with your company. This way, we can tailor a budget to your needs. Froehling Anderson is here to help you create a successful financial plan. Give us a call at 952-979-3100 or visit our website at fa-cpa.com for any questions or concerns you have about budgeting.
More information about budgeting with FA: https://fa-cpa.com/wp-content/uploads/Budgeting.pdf