A budget is a financial plan which includes an estimation of revenue and expenses for a defined period.
Most companies prepare an annual budget, also known as an annual plan, that serves as a guidebook for operating the company.
In organizations where different departments or divisions exist, the various managers of these functional units are responsible for preparing their own budgets.
These departmental budgets are submitted to the finance department and consolidated by the staff to prepare a budget for the company as a whole. The top management provides guidelines for divisional managers to adhere to.
Review By Finance Staff
The finance department reviews the departmental budgets to evaluate the proposed revenue and the assumptions used to prepare the revenue forecast. They aim to ensure that each budget is reasonable and feasible. They also try to identify potential budget cuts by the top management that may occur when the proposed expenditures for the company are too high.
Review By the Top Management
The top management examines the consolidated budget to determine whether the revenue and profit forecasts correspond with the company’s goals for the forthcoming year. If the projected profit does not meet the expectations of the management, the company either seeks new ways to generate additional revenue, or makes spending cuts to increase the company’s bottom line profit. The budget analysis that is done by the finance department helps the top management to identify areas of the budget that needs further explanation from the divisional managers. Also, at this stage, expenses that are considered too high by the top management can be cut.
Discussion With Division Managers
Next, the senior management meets with various division managers and the finance staff members to discuss the details of the budget request. It is at this stage that the managers defend their requests. The top management is saddled with the responsibility of ensuring that all the various departments have the resources they need to function effectively while keeping total cost down at a level that the organization can maintain profitability
Making Tough Decisions
Once the top management identifies expenses that should be cut down, the reason for this tough decision should be communicated to the department manager so that at the end of the approval process, each manager will feel fairly treated. Similarly, each department leader should feel he has ample resources to reach his departmental goals, which will be a motivation to put in a maximum effort in the forthcoming year.
One of the major challenges in the budget approval process is the timely approval of the budget request and this can have a significant impact on the business operations. If a member of the top management who is entitled to approve the budget is absent or unavailable, the approval process gets delayed further, affecting critical transactions which will amount to huge losses in the organization.
Budget approval automation mitigates these problems and empowers your workforce to carry out their work anywhere, anytime.
Streamlines Recurring Budget Approval Processes
One of the major advantages of budget approval automation is the streamlined repeatable approval processes that allow companies to standardize their budget approval process and also track their progress. This way, errors due to repeated processes are completely eliminated, thus enabling your company to accrue significant gains while maintaining productivity and operational efficiency.
Enforces Accountability and Compliance
Automation enforces accountability and improves timely compliance with the budget approval process by helping the finance staff, divisional managers, and top management to perfectly know what tasks need to be attended in order of priority.
Also, with an automated system, companies can set up an access control that regulates who or what can view their budgetary information.
Optimizes Time And Improves The Decision Making Process
Once you configure the budget approval workflow of your company, the automation system automatically assigns and delivers tasks to your team members via email notifications, telling them what tasks need to be accomplished. This way, even if managers are on vacation, they cannot miss key approvals, thus improving the decision-making process.
Facilitates Instant and Accurate Information Access Between Managers
Budget approval automation provides easy access to data and streamlines information processing between managers and finance staff. Top management can expedite approvals at any point in time.
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