Long-standing processes governing budgeting, planning, forecasting, reporting, and risk management are getting increasingly complicated.   

As a result, budget and finance professionals are under increasing pressure to increase accuracy, efficiency, improved controls, and auditability, as well as to give greater transparency into costs, resources, and performance. 

Despite external efforts to enhance the budgeting process, many public sector organizations have been unable to embrace more complex budgeting models and procedures.

As a result, we’ve created a “cheat sheet” outlining the five most prevalent issues with traditional budgeting, as well as our recommended budget methodology and best practice solutions:

Public budget challenge:

traditional budgeting does not sufficiently relate financial investments to results or outcomes, which restricts the capacity for in-depth research and understanding of the true ROI for any particular line of business.

Quick fix: A performance-based framework allocates resources to certain objectives or activities based on acceptable criteria; eventually, this framework gives enhanced visibility into how financial decisions translate into results. 

Public budget challenge:

Traditional budgets are established based on requests from competing stakeholders, each justifying their expected spending based on their departmental needs rather than the broader aims of the business. 

Apriority-based evaluation framework aids in the establishment of clear targets and priorities based on this year’s strategic goals.

As a result, this framework can help you align your actions with your vision and measure your progress.

The goals are then presented to all stakeholders engaged in the budget process, resulting in speedier choices and minimising budget discussion challenges that may develop due to competing interests and priorities. 

Budget process challenge:

Traditional budgeting approaches often rely on many incorrect assumptions that have been made, requiring not only a significant time investment but also time-consuming human input.

Budgets and financial predictions are based on operational drivers such as FTEs, customers, units of output, and so on in driver-based planning.

It employs mathematical and connected relationships to generate precise budgeting, forecasting, and planning models with less inputs than traditional models, while also decreasing mistakes and saving time through the use of pre-programmed calculations based on operational operations. 

Budgeting challenge:

While static budgets and multi-year financial plans produce high-level financial targets and constraints, material deviations during the year can paralyse an organisation that lacks an efficient process for evaluating the causes of these changes and adjusting budgets and plans accordingly. 

Suggestion: Budgets and plans should be modified as needed to reflect economic, organisational, and other outside circumstances in order to be effective, rather than being viewed as’set in stone.

Budget process challenge:

An unpredictable and sometimes turbulent economy, it is inevitable that substantial changes in resource levels, budget limits, and strategies will occur.

If major deviations occur during the year, they can immobilise an organisation that does not have an effective mechanism in place for examining the causes of these changes and modifying budgets and plans accordingly. 

Solution: Performance in a “what-if” situation.

A budget that considers performance under alternative.

(what-if) scenarios will serve your business better than one that overlooks the future and risks and spends too much time describing the budget based on what happened in the past. 

By integrating contemporary generation public sector budgeting software solutions into the process, an organization may be able to dramatically improve its budgeting, forecasting, and performance management capabilities.

Not only can software speed up decision-making by making your data more accessible, but it can also highlight trends and exceptions, foster a common understanding of the various drivers of performance and their relationship to future outcomes, and aid in the development of new insights based on extensive data use, statistical and quantitative analysis, and predictive modelling. 

making the decision to install a new budgeting method and software solution, you may face a difficult assignment with significant repercussions in the long run.

That is why, before making any changes to your budget technique, it is vital to understand your needs, be aware of your possibilities, and arm yourself with the necessary skills and resources.