How works Budget Control.
If your company only requires the implementation and maintenance of a Budget Control System, I currently offer it as an independent service to the rest of the usual services that I provide to the companies I work with.
How do we work in the Budget Control system?
In the first place, the only information we need from your management program or ERP are the journal items from the journal entries (accont move lines), and just the fields, accounting date, accounting account, account name, debit and credit amounts.
The rest of the configurations are performed into the budget control system.
What do we configure in Budget Control to start the implementation?
In the first place, we define the analytical accounts or budget items, with which we elaborate a single model of the P&L Analytical Results to subsequently control the results.
Once the journals items are imported, we can list the ledger accounts used and map or link them to the analytical accounts or budget items previously defined.
With this configuration, if we have imported the journal items of the previous year and months of the current year, we can now obtain a comparative P&L Analytic Report between the current months Vs the same period of the previous year. We can even obtain only a P&L Analytic Report from the previous year.
The next step is to define the objective for the current year, the ideal is to do it at the end of the previous year or at the beginning of the current year, but it does not matter, since it will be a reference of what you want to obtain.
The objective is what we call BUDGET, and if we define it in March, we can take advantage of the fact that we already have January and February closed in accounting, so we will only have to establish the 9-month objective.
The simplest way to elaborate a BUDGET for the current year is to based on accounting data from the previous year and adjust it for the current year.
Once the goal is established, it has to be immovable.
What is going to change every month will be the forecasts.
If the budget is prepared in January, we will have a budget from January to December.
Forecasts in January will be the same as the BUDGET.
But now comes the good part, if we review the forecasts in February for the whole year, that is, from February to December, these forecasts should change due to external factors such as increased costs not included in the budget, increased or decreased revenue and internal factors such as decisions and measures to be taken.
With the forecasts from March to December and the actual data for January and February we will have a very approximate vision of the income, expenses, margins and profitability that the company will have at the end of the year.
These forecasts + actual data is what we call the Full-Year Forecast.
If we compare the Full-Year Forecast against the budget that we have initially defined, we will be able to analyze the deviations with respect to what the company expected to achieve.
We do all this in a very simple, practical and understandable for the company.
For example, if the company does not know how to prepare the objective (Budget) for this year, that is, what adjustments it needs to apply over to the previous year in order to establish a budget aligned with its strategic plan, there is no problem, we can always take as reference data from the previous year without adjustments, which would mean that the company at least wants to match or improve the results of the previous year, that means an objective like any other else.
Once a month we update the real data of the company and review the forecasts of the months that are not yet closed from accounting, this is where the company actively participates since it better knows what is going to happen with each item of income and expenses .
The result of all this is planning and total control over the company’s results in any month of the year. This means that there is no need to wait for the financial year to be closed to know the result that it will have.
This has many advantages.
In the current year you can already set a strategy for the following year.
In addition to applying the necessary measures to promote internal improvements that allow achieving or exceeding the desired results.
The companies in which we implement this methodology, widely used in American companies, are surprised by the great utility it brings them and the benefits it generates.
Download a DEMO of the 2kM15 version Budget Control.
This way of keeping a budget control changes everything. We had never tried it because we did not think it would be useful. But with Dani’s methodology we now see the potential and we think it will help us in very many ways.
The Budgetary Control technique and tool is helping us to better manage expenses and that allows us to make better decisions. A great contribution to our management control.
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Industrial company financial manager
Dani is helping us to use ODOO more efficiently, we are rapidly leveling up with the ERP. It is also preparing us very useful analysis and control reports and outstanding management tools. Always available by phone or email, willing to help and collaborate in everything that is proposed. Very professional and fast work. A key service for our company.
Controller ODOO ERP