Build your budget around a few of these key metrics to fuel business growth instead of budgeting down to the cent. Think gross profit, net promoter score/customer loyalty, or sales channel profitability. What kind of budget do you need in place to help those metrics skyrocket? If your financial goals are for growth, then you want to strategize your spending accordingly.
Say, for example, you’re a retail business trying to increase profitability. You will want to determine which sales channels you want to optimize to fuel your most profitable growth and budget according to those marketing and sales needs, even if it means tightening spending in another department. If you are a tech company looking to reduce your cash burn, you may want to build a budget around improving your liquidity while simultaneously increasing your monthly recurring revenue. In this case, your budget may need to focus on ways to accelerate your collections of accounts receivable (e.g. give a discount for customers to pay a full year upfront), along with the additional marketing training needed for upselling.
Related read: If you’re in the consumer products industry don’t miss this guest post for Brightpearl by founder and director, Chris Arndt on the 8 KPI’s a Retailer Should Know (along with tips on how to improve them).
Your financial plan should provide an idea of what is most important to focus on when comparing your actual cash flow to your budget. Carolyn suggests that your actual-to-budget be high-level and then drill down to details when needed.