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If budgets are inflexible and a crucial forecast can't be adjusted, it can lead to several problems. Firstly, it can cause excessive stress for the person making the budget as they have to ensure absolute accuracy. Secondly, it can hinder the company's ability to adapt to changes in the market or business environment. This lack of flexibility can also prevent the company from taking advantage of new opportunities that arise. Lastly, it can lead to poor resource allocation, as resources may be locked into areas that are no longer as profitable or beneficial as initially forecasted.
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Simplify the process of budget creation with our Budgeting Model template. This template includes examples from multiple departments, as well as conso...
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Change the purpose of planning and budgeting – planning and budgeting models are designed to help senior management forecast, command and control. First, forecast precisely what the company must do to deliver stable earnings per share (EPS) trends. Then, order each business department and function to execute the plans that will add up to the targeted total. Ne monitors activities within each department to ensure the team members stick to plans and deliver desired results. Shift the focus from financial precision to strategic success - a good approach is to turn the targeted outcomes developed in step one into strategic portfolio guidelines that drive the budgeting and adaptation process, which will spark discussions that allocate resources from the strategy down, rather than from individual projects up. Plan faster and more frequently - if budgets are inflexible and a crucial forecast can't be adjusted, the person making it excessively stressed over the budget accuracy. Even small m...
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