Balancing Simplicity with Detail for Better Budgeting

It’s an age-old dilemma: too little detail in budgeting can result in overlooked expenses and missed business opportunities, whereas too much detail can distract from an organization’s strategic business objectives and key growth drivers. 

It’s an art and science to strike the right balance between simplicity and detail in a business budget. Budgeting tools like Enterprise Resource Planning (ERP) software can help teams identify this balance and get the best of both worlds. 

When Details Matter

Understanding the smaller moving parts within your organization can help you understand where and how much weight to give to various budget items. Expenses should be balanced against your anticipated income to justify allocations. 

Many companies prefer a top-down approach to budgeting – Outline your broader spending categories, then dial in on each of them to identify spending needs. Start by calculating your fixed expenses. This is an area where fine details really matter, as every dollar can impact spending in other areas. These expenses include fixed costs like rent as well as employee salaries. If you have an ERP solution in place, use your system to identify these expenses.

Another factor you’ll want to detail is the variable costs of goods or services. For example, if you know that you need to hire an employee for every $100,000 in revenue growth, this should be calculated into your budget.

Last but not least, details play an important role when considering known capital investments or one-time purchases for the upcoming year, as these investments impact cash flow.

Balancing Simplicity with Detail for Better Budgeting

When Simplicity Matters

More detail in your budget doesn’t necessarily lead to greater accuracy. This is the case when too many details obscure the bigger picture and business objectives. 

Some details are essential to budgeting, but good budgeting tools are less focused on dollar amounts and more focused on how key drivers impact your business’s growth and sustainability. 

For example, if increasing profitability is your goal, you’ll want to use your ERP software to look at your various sales channels to see which ones are driving the greatest return. These are the channels where you’ll want to increase spending, as well as the marketing activities related to these channels. In turn, this could also mean decreasing spending in another area or department. 

Overall, the focus should be on key metrics, not the individual items to which you allocate money. 

How ERP Software Supports the Budget Balancing Act

One way to overcome the complexities of budgeting is to understand which details matter and why. This can help you eliminate extraneous information that can distract from the core components and streamline budgeting decisions. 

An ERP solution supports better budgeting by providing both broad-level and detailed insights across your organization. ERP software can also improve forecasting by holistically reviewing data in real time to identify patterns and generate clearer insights. 

Ready to learn more about how ERP software can help you conquer the budget balancing act? Reach out to us. We’d love to chat.

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