Improving the Budgeting Process: Steps for Startups
Budgeting corporate spending is incredibly important, but tracking how much you actually spent and adjusting your startup business budget for the next month is just as crucial. The problem is, the traditional method for financial reporting obscures actual spending until the books have been closed at the end of the month.
So, what’s the right way to do it? What are the best practices for agile, growing startups to review their monthly spend? What tools do they need to be able to track business spending in real-time, and not just at the end of the month?
We’re answering those questions and more, including:
- What is the budgeting process? The importance & challenges for startups
- Why the traditional budgeting process is broken
- How to make your budgeting process more efficient with spend management
- Tools for streamlining your monthly budgeting process
A budgeting process is used to forecast future income and expenditure in order for an organization to create a realistic budget that can be adhered to.
The process should factor in the strategic aims of the organization and be based on past behavior & data. Having budgets that are easy to measure (with the right tools in place) is a key element. since that clear measurement enables companies to track spend across the budget period.
This process can be particularly challenging for startups with big goals, high accountability and sometimes tight budgets. The agility and speed of the budgeting process becomes particularly important in order to hit their goals.
Why the traditional budgeting process is broken
Most businesses are still stuck on old school methods of managing spending. They typically involve processing expense reports at the end of the month and using them to calculate actual spend versus budgeted spend. Finance teams then evaluate which categories of spending were much lower or much higher than budgeted — and why — so that they can adjust startup business budgets for the following month.
Finance professionals know that this process is problematic for several reasons. First, it obscures real-time spend. You can’t see how much is being spent until the end of the month, at which point it’s too late to reverse any damage to the budget.
Second, this process is far too time-consuming. Employees have to collect receipts and create expense reports. Then finance teams need to review them, approve expenses, distribute reimbursements, dispute out-of-policy expenses, and reconcile the small business budget.
Your finance department knows these pain points all too well. There has to be a better way to automate these processes to be able to report on your budgets in real-time, right?! Thankfully, there is.
How to make your budgeting process more efficient with spend management
So how can you make your monthly spending review more efficient? By replacing this traditional expensing method with a spend management process. Here’s why spend management software is advantageous.
Spend management gives you real-time visibility into spending
With traditional expensing methods, you can’t see actual spend until expense reports have been submitted and the books have been closed. At that point, it’s usually too late to reverse any damage.
Being able to see what is being purchased, when, and by whom lets you know the actual spend as it happens, rather than at the end of the month. These rolling forecasts are beneficial for agile startups who may need to pivot their spending priorities often. Visibility lets your team spend strategically while staying on budget.
Spend management lets you manage spending before it happens
Traditional business spending methods require spenders to take action and ask for forgiveness instead of permission.
Finance teams don’t have the bandwidth to personally approve every single expense made on behalf of the company. That’s why most finance teams opt to review expenses after they’ve already been made, which leaves them no choice but to try to reverse the damage by either working with the vendor to issue a refund or rejecting a reimbursement request from an employee.
This system ultimately gives the finance team no spend control and forces them to constantly put out fires instead of working from a place of control. Agile startups need to control spending before it happens. Fortunately, there are new, less tedious ways of doing so.
Tools for streamlining your monthly budgeting process
New solutions are making it easy for companies of all sizes to gain greater visibility into and control over their spending, without making more work for their employees. CFOs: say goodbye to tracking your budgets in excel spreadsheets!
Spend management software
Spend management software can help you take a proactive approach to spending. It lets you see spending as it happens and set limits on spending without slowing down your finance team. You can spend less time tracking down expenses and completing other tedious tasks, and more time on business planning and decision making.
Spend management software frees your finance team up from working on repetitive, mindless tasks so that they can work on projects that make a big impact. Employees are empowered to make purchases that push the bottom line. Lola.com's spend management solution helps you get on budget in minutes.
Corporate cards with budgeting software
Plastic is no longer the only form corporate cards come in. Corporate card companies are embracing new tech by offering budget management tools. Take, for instance, virtual cards that you can grant employees temporary access to, and set very specific spending limits on.
Look for a comprehensive business spend management software that has virtual card payment capabilities, or find a corporate card partner that can work with your existing finance tool. Together, these tools give you the power to set limits on who can spend how much, and visibility into spending as soon as it happens. An agile startup with a well managed budget can grow without bureaucracy getting in the way.
With Lola.com, you can instantly create virtual cards that are tied to budgets to prevent overspend and see every dollar that's spent.
It’s time to automate your budgeting process and achieve your financial goals through agile operations. Need help making your first business budget? Download Lola’s business budget template for agile startups.