Does Controlling Your Budget Feel Like a Game of Whack A Mole?
By: Mark A. Brousseau | July 30, 2020
ARTICLE — Just when you think you have eliminated the last rogue expense another one randomly pops up.
That is not the only similarity between controlling your budget and playing Whack A Mole. Ensuring budget compliance can be as exhausting as feverishly pounding plastic moles with a mallet.
But there is a lot more than a pink stuffed animal at stake for finance leaders that do not “whack” all the purchases that fall outside of the current budget, particularly in turbulent economic times.
Budget overruns negatively impact cash flows, profitability, operating margins, and forecasting.
And the liquidity implications of poor budget control may get worse as the economic fallout of the pandemic continues. The 1,000 largest non-financial companies in the United States already started paying their suppliers slower in 2019 because of slower cash collection from customers, The Hackett Group reports. As a result, working capital performance fell in 2019 after years of improvement.
Not surprisingly, many businesses are launching comprehensive financial transformation efforts for the first time as they try to position their business for success once the world emerges from the crisis. The quick fixes that businesses have relied on over the past decade – things like external financing – cannot match the improvements in the performance of structural and organizational changes.
And the pandemic is creating a sense of urgency among businesses that we have not experienced since the Great Recession. Businesses are making liquidity and cash flow a top priority.
Improving spend management and budgetary control is a good place to start.
The real-time insights and control provided by advanced budget control solutions “whack” budget overruns while reducing the fever-pitched pace at which finance leaders must move to prevent them.
Advanced budget control solutions help CFOs proactively monitor spending throughout the enterprise. Budget availability is instantly checked as requisitions and purchase orders are created, reducing the possibility of budget overruns. Procurement governance best practices are enforced automatically. Reconciling budget versus actual reports against procurement data is a breeze. And a budgetary control solution can be integrated with a business’ NetSuite ERP for greater visibility.
Businesses stand to gain $1.3 trillion from working capital improvements, The Hackett Group says. Advanced budget control solutions put these savings within arm’s reach of businesses.
That sure beats any carnival prize.
Want to enhance your spend control?