The What, How, and Why of the Business Budget Approvals
Budget Approval [Wiki]
For an organization to run effectively, it needs to spend its money responsibly. Everyone agrees that budgeting is the best way to stay within your spending boundaries and make sure your cash doesn’t deplete too fast.
But as soon as you grow to have more than two departments, the budget approvals become so murky that it almost feels like a joke. With misinformation, slow processing, and archaic tools, it’s hard to believe in the accuracy of budgetary spending.
How can organizations abide by good budgeting principles and still manage to get their budget approval system to not last for months on end?
What is budget approval?
In every organization, each department must set its own budget of projected expenses and revenues for the period. These budgets must be approved by the finance and leadership teams to make sure the numbers are in line with corporate projections and priorities.
Your 3 step guide to create budget approval system
Here are four simple steps to switch to a digital budget approval system using Kissflow
Step 1: Customize the forms
This is where you customize the pre-built budget approval app to suit your exact needs. Create additional form fields to capture all the necessary details. You can add additional fields, dates, users with drag-and-drop functionalities.
There are also options to attach additional documents like proposals, quotes, and more. You can auto-fetch data from master databases or compute certain fields.
Step 2: Define the workflow
Design the sequential path of tasks and assign the roles and responsibilities of the different individuals in the workflow. Include all the stakeholders, hide sensitive information, and provide role-based access to your team.
Step 3: Track the progress
You can view the status of budget requests and identify bottlenecks in a glance. If your requirements change, you can easily make alterations to the budget management system to improve the efficiency of your budget approvals.
Benefits of an automated budget approval
1. Increased control.
When you automate the budget approval process , you ensure that it is always followed the same way every time without exceptions. If your process is unwieldy, adding automation gives you a much greater level of control.
2. Greater transparency.
If you handle budget approvals over email and spreadsheets, you almost never know who you are waiting for and what details are still pending. With an automated system, you can know instantly where the process is and how to move forward.
3. Fewer errors.
By including your budget proposals on an automated form, there is less chance that you will have errors that repeat through the process. Including more approvals also makes sure you have the most accurate data.
4. Integration possibilities.
In an automated budget approval system, you can link the process to other software you regularly use. This means you can pull or push data from accounting software, ERPs, CRMs, standalone spreadsheets, and many other options.
Roadblocks for budget approval
While budget approvals may seem pretty straightforward, there are lots of chances for holdups that make the budget approval system drag on too long.
1. Human Errors
One simple problem with budget approvals is that they generally cascade spreadsheet data. This means that if there’s a small formula or data entry error in the first one, all of the subsequent spreadsheets will also include inaccurate information. When humans work with spreadsheets, there is a large chance for manual errors, and a spreadsheet cannot flag these errors on its own.
2. Multiple versions
Another roadblock is versioning. If you are sharing Final_Budget_2.1_CORRECTED(4), there’s a high likelihood that you don’t have the right version of the numbers to review. The budget approval process is hard to control when many different versions of a spreadsheet are floating around.
Sharing budgets via email further compounds the budget approval system. When you submit a budget, if you send it via email, there’s no way to ensure that the correct file is used in the final version, especially if you make several changes along the way. Emails often get lost as well or buried under a sea of other messages.
3. Data confidentiality
Spreadsheets are also notoriously hard to protect private data. Budgets often include salaries and this information is hard to protect from being seen by the wrong people. When sharing data and budgets, this information is easy to let slip.
Miscommunicated targets represent yet another roadblock. As department heads work to create budgets, they may not be aware of plans the executive leadership team has for goals. After discussion, budgets often need to be amended, meaning a redo of all the work already done.
Many budgets take a lot of time and effort to calculate, and sometimes different departments are dependent on different data that comes at different times of the year, making one department to always suffer from inaccurate details.
Overcoming budget approval problems with automation
The most important thing you can do when starting the budget approval process is determining the start and end events.
1. Do you complete sales forecasts before other budgeting takes place?
2. What about goal setting?
3. What needs to happen before department heads can set their budgets?
By sitting down and modelling out the entire process with a business process modelling tool, you can figure out exactly how the process should function in an ideal setting. By automating the workflow, you can streamline the entire budget approval process.
An automated budget approval also includes a form with validated details. This means that department heads will always be able to know exactly what details are necessary to submit their budgets. They can also restrict access to sensitive information like salaries.
When the automated process starts, each task is assigned to an individual and must be completed before moving to the next task. Whoever owns the process can see where the process is hung up and what help needs to be given.
When your department heads don’t trust the budgeting process, they are more likely to not take it seriously and submit erroneous budgets, assuming they will all be changed later.
Try Kissflow Finance & Ops Cloud for your budget management
With Kissflow Finance and operations cloud, you can easily transform any complex, manual process into a streamlined, automated streak. You can ensure that your data is correct and the right people get to sign off on every stage of the budgeting process.