Rebuilding financial confidence: a guide to mastering your budget

In this paper, Eight Advisory highlights shortcomings in budgeting and key levers to improve the content of forecasts. 

As a business consultancy, we are receiving more and more calls from clients who are struggling to explain the variances of their actual results compared to their budgets (both downwards and sometimes upwards).

Finding the causes of these variances or ‘surprises’, whether they relate to gross margin, operating margin, stock levels or cash balance, often disturbs the financial and operational management agenda. This generates:

• An investment of resources, especially employee time, to understand the root causes,
•  Stress, often accompanied by a feeling of losing control of management metrics,
• Mistrust of system data or even a questioning of existing performance indicators.

The first source of discrepancies between budget and actuals often lies in the design of the budget itself. In other words, a well-designed budget enables organisations to anticipate fluctuations in results and avoid many of the disadvantages mentioned above.

In the Innovation in Finance 2023 study issued by Eight Advisory, 91% of the organisations surveyed planned to maintain a traditional budgeting approach. We thought it would be useful to highlight a number of shortcomings in budgeting, particularly for small and medium-sized companies, and to emphasise the key levers that can be used to significantly improve the content of forecasts:

•  Settings of key indicators
• Rationalisation of the databases
• Complementarity of objectives
• Team stability and knowledge sharing
• Budget tools

To learn more, discover our White Paper-Rebuilding financial confidence: a guide to mastering your budget (available in French)