Budget Planning 2023: Tips & Steps for Creation

Budget Concept

The board meeting dates are set, and calendar invites have been sent.

Finance leaders of any company can now start working backward from that date to establish timelines, deadlines, and milestones that set them up for success in creating next year’s budget.

Unfortunately, without the correct starting point, it’s possible those plans are set up for failure.

At Bridgepoint, we’ve helped companies for more than 20 years establish roadmaps that lead to informed, measured, and thorough budget plans that can make or break a company’s outlook for at least the next 12 months. Here’s some things we’ve learned and some ways we can help.

The Best Steps to Take Before Conducting Budget Planning for 2023

1. Align with company leaders

The Finance and Strategy leader of an organization is often the glue that holds all other departments together.

This also includes the relationship between the C-Suite and the rest of the company. Sitting down with the C-Suite to understand what the high-level company goals are for the upcoming fiscal year is step #1 to creating a financial budget that aligns to that strategy.

Knowing the revenue target (and related KPI targets) provide the framework and starting point to begin creating a budget.

If you have a Revenue and EBITDA target, then cost of goods sold and expenses are your variables to solve for.

2. Engage with the Sales Team

If obtaining overall targets for the budget are the frame to a budget, meeting with the Sales team to understand their strategy for hitting that top line target is concrete to the foundation.

Timing of this discussion is key. The-earlier-the-better for lack of a better term.

This is because their strategy to achieve a top line target has potential to alter many different categories within the budget that must be understood and quantified before structuring other departments budget outlooks.

For example, the top line target growth for 2023 is 30% from 2022. What is the sales team’s strategy to achieve that growth?

Depending on industry, environment, company history, or all of the above, it could include a variety of additions or changes to the company that could impact the company greatly and eventually Gross Margin or EBITDA targets.

Is the solution hiring more sales team members? Is the solution more marketing spend? More focus on current customers to reduce churn?

These are just a few examples of strategies that have very different impacts on headcount planning and expense planning that must be deeply understood before moving forward with budget planning.

Given the above, it’s an easy argument to suggest that having a strong relationship between sales and finance makes this exercise much more fruitful and efficient.

Final Thoughts on Budget Planning for 2023

There’s a great deal of time spent on meeting with other department leads and building out forecasts once a revenue strategy is agreed to and contextualized. It’s incredibly difficult to balance this workload with recurring accounting and finance responsibilities.

Bridgepoint has the experienced professionals to partner with you to understand your business and help complete this process the right way. Setting you and your company up for success in the upcoming year.

How Bridgepoint helps with budget planning:

  • Building sophisticated budgeting models that can output sensitivity and scenario analysis so that you can better understand the impact of key KPIs and how they relate to your goals.
  • Testing assumptions by analyzing historical and external macroeconomic data.
  • Automating budgeting and forecasting processes so that they can run the process more efficiently and with more accuracy.
  • Assisting or leading in creating a detailed project plan. This can mitigate or eliminate risks in the process such as miscommunication with key stakeholders, agreed inputs from the business, cross functional assumptions along, and structure a cadence of meetings that need to happen for information gathering, analysis, consulting, goal setting, and reporting.
  • Creating models and processes for ongoing reporting on performance against budget (variance analysis) with real-time dashboards, etc. so that the decision makers can take corrective actions proactively

Need Budgeting Support?

Budgeting, strategic planning and forecasting are core processes of successful companies and, when executed properly, provide competitive advantage. We believe these core processes are interrelated, so we consider annual budgets, quarterly forecasts and long-range strategic plans all part of a wholistic approach.

Contact us today or click below to learn more about our Finance & Accounting advisors.