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Refining Your Budget in the New Fiscal Year

The month of January is a busy one for finance professionals with a December 31 year-end - closing the books, board reporting, regulatory reporting, and preparing for an audit. At the end of January, with just one month’s actual results, your budget may also beg for attention. Businesses change fast so you may already wonder, “What were we thinking?” Here are some tips on how to start the year off right.


1. Check your exit rates. Recent sequential trends are a good sanity check for your budget. Analyze your P&L using the trend of the last three month’s actuals of the previous year compared to the budget for the first three months of the new year. Putting aside seasonality, sequential trends should be fairly smooth so look for hockey sticks. These line items may need some further attention.


2. Allow your business lines to make adjustments. Your business lines now have a better idea of how they will make the budget commitments. Open the budget for a day or two to allow for geography changes. This will help your business lines track accountability.


3. Identify any large, one-time items that have cropped up. If the item is in your favor, you may have a team that already has the year in the bag. Fix it, don’t let them coast. If there is a large “bad guy” you may have a team that now has a hopeless task. Fix that too because an unrealistic goal helps no one.


4. Dust off those critical execution dependencies. Are you on track to execute the hiring or product launch or technology investment? Is there a handshake that may be broken that another division needs to know about so they can adjust course?


5. Get your first KPI reporting out concurrent with January financials. Keep the performance dialogue going with senior management so there is maximum lead time to work opportunities or the inevitable problems.

And remember, a budget is both an initial best guess about the next 12 months and an accountability tool. As you transition into monitoring performance against the budget and updating forecasts based on the latest information - the budget is an organizationally prioritized baseline that will anchor your management team in good and tough times.

Frankly, this is a good argument for continuous forecasting.

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