In part one of our two-part blog series covering the upcoming 2024 budgeting season, we discussed the various challenges that chief financial officers (CFOS) and controllers are very likely to encounter.
While there is no shortage of hurdles coming down the pipeline for the next budgeting season, you and your organization can overcome all of them by leveraging some of the established best practices and practical insights listed below:
Set the Stage for a Fresh Start With Zero-Based Budgeting
CFOs and controllers often balk at the proposition of zero-based budgeting, and that is understandable, given that it is an arduous process that involves justifying every expense for each budgeting period.
While you won’t necessarily need to apply zero-based budgeting to every assessment period, leveraging the concept during the 2024 budgeting season will be a great way to give your business a fresh start. Additionally, conducting a zero-based budgeting analysis can help you determine where you can shift your spending and how much capital you can relocate in the event of a worst-case scenario.
If your organization never returned to its pre-pandemic spending levels in any key areas, such as training, procurement, or travel and entertainment, zero-based budgeting will help you determine whether reinvesting in such areas is a viable option in 2024.
Stress-Test Assumptions and Critical Scenarios
As a finance executive, it is your job to prepare your organization for the unexpected, and though you likely already excel at doing so, it is vital that you stress-test your assumptions and critical scenarios as you approach the 2024 budgeting season.
Although fears about a potential recession have largely subsided, a cloud of uncertainty still lingers over 2024. Amidst unpredictable and often volatile marketing conditions, it is critical that you know which economic scenarios you predict are most likely to materialize.
Once you explore a variety of critical scenarios, you can integrate contingency plans into your 2024 budget. Having them in place will significantly cut down on response times and enable your business to rebound should the volatile economy take a major turn for the worst.
During these processes, make sure to involve other teams, such as sales, marketing, and legal. Together, you can all make accurate predictions about what challenges will emerge in the coming year.
Traditionally, budgets are fixed for the year, and though you do need to create some rigid financial constraints for the 2024 budgeting season, you should also consider implementing secondary spending control strategies, such as cash war rooms or spending control towers.
Leveraging additional spending control measures can provide your organization with much-needed financial flexibility in the event of major cash flow disruptions or supply chain challenges.
With that said, as part of your budgeting process, implement defined triggers that indicate when and how reserve funds should be utilized. As the year progresses, reserve funds can be released if they were not needed in the previous quarter, and these “excess” funds can be allocated toward R&D projects, hiring initiatives, technology investments, or capital expenditures.
Assign Finite Finance Talent Based on Priority
As mentioned in part one of our blog, there is a major shortage of professional finance talent, and though you may put your best foot forward, these challenges aren’t going anywhere anytime soon. Even if your business has been minimally impacted by current shortages, you need to optimize your allocation of talent resources by assigning top performers to areas and tasks of the highest priority.
As you work to restructure your project management strategy, consider falling back on some strategies you may have implemented at the start of the pandemic, such as dividing your team into smaller groups and condensing reporting cycles. Embrace established project management strategies, such as the agile methodology, and structure teams in a way that allows your staff to complement one another’s talents.
Furthermore, strategically implement automation tools in order to reduce the workload on your staff. Prioritize automating tedious, redundant tasks so that your teams can devote their energy to more dynamic work that supports the organization’s financial goals.
From a budgeting perspective, investing in project management training and technologies can transform your departments into more nimble teams.
The 2024 Budgeting Season Will Be Filled With Challenges (and Opportunities)
The 2024 budgeting season is bound to be filled with a variety of challenges, including staffing shortages, economic volatility, and shifting compliance requirements, but controllers and CFOs can effectively navigate each of these hurdles by engaging in comprehensive planning during the upcoming budgeting cycle.
Additionally, CFOs and controllers must rely on other members of the C-suite, as well as department leaders from across the organization, to guide their planning and budgeting processes. By collaborating with and mobilizing leaders at every level of the business, CFOs can obtain a more holistic view of the challenges facing their organization during the 2024 budgeting season.
As you step forward and face the challenges of the coming year, remember that each of these hurdles represents an opportunity to propel your organization closer toward its growth goals.