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Case History/ Budgeting

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What’s the budget?

Budgeting is the process of creating a plan to spend your money. This spending plan is called a budget. Creating this spending plan allows you to determine in advance whether you will have enough money to do the things you need to do or would like to do. Budgeting is simply balancing your expenses with your income.

Budget is too general a term.
For each activity it is necessary to create and manage the life cycle of a budget.
For each activity the budget is set in a different way.
We are focused on the marketing budget, the customer care budget, the commercial budget, the human resource management budget, the budget of a new business unit similar-to a start-up.

Basically, the budget can be annual, quarterly or linked to a project.
The budgets are proposed by the department/project manager who may undergo modifications by their manager to align with the company’s strategic objectives.
So the budget project has an approval phase which is specific for each company.
Budgets should consider the balance between expenses, revenues and profits, with a setup similar to a general ledger.
The budget considers a temporal applicability that is specific to the project and therefore could extend for a period shorter or longer than a fiscal year and ends, in general, at the break-even or at the ROI considering the possible investment.

The budgets we find the main items which are:

  • Expenses (fixed, variable, semi-variable);
  • Revenues: fixed, variable, semi-variable;
  • Moreover;
  • the monthly cash-flow indicating the key elements of the budget:
  • maximum financial criticality (Investment);
  • balancing of expenses and revenues at a monthly level (operating break-even);
  • ROI: return on investment.

Which Advantages

Behind the forecasts, the business plan is necessary to have a robust tool and be able to manage the forecast correctly so that the business plan is not just a document but a law that must be respected with inflexibility.

For each activity it is necessary to design the estimated budget, constantly update the current budget until the end of the project and constantly evaluate the difference between the initial budget and the current budget.

One way to keep track is to define the initial forecast (before starting) which is called the “Projected Budget” and a copy which has the name “Actual budget”.
As expenses and receipts are recorded, these move to the “Actual” Excel sheet.
The third excel sheet will have a template similar (but not the same) to the other two because there are both final prospectuses side by side from which you can easily check where the differences are with a quick glance.
What should your business budget template contain?
When making your own business budget template, make sure it contains this information:

  • Expected revenues and sales;
  • Fixed costs;
  • Variable costs;
  • Semi-variable costs;
  • Profits;

Case History

Do small companies (less than 30 employees) and start-ups need it more than medium-sized established companies?
Jack Ma Yun once wrote that the most dynamic entrepreneurial world that produces the greatest wealth with the highest coefficient of innovation are companies with fewer than 30 employees with an average age of less than 30 years and less than 30 years of experience.
the first question we ask ourselves is whether these companies urgently need budget accounting or does the budget remain relegated to medium and large companies while small and medium-sized companies can do without it?
But above all the start-ups that have a chaotic life and with an immature preparation for the problems of finance and management control?

Precisely because the answer seemed obvious, a small company in the category mentioned by Jack Ma, precisely enlightened and innovative, wanted to adopt a simple, immediate, inexpensive home-made budget accounting solution.

The choice fell on PHPRunner because this type of applications are precisely those that fall within the applications (database, simple, fast, with low algorithmic impact for internal use only) that best exploit the characteristics of a code generator.

The budget accounting had to be used to keep track of the forecast changes of the cost centers and of the centers (marketing, human resources, production, administration and general expenses) of revenues (typically sales department, customer care) that can be compared with the accounting balance sheet.

The aim was achieved almost immediately and the development estimate aligned with the real construction costs.

The company gained immediate financial and economic benefits and a more mature corporate culture to grow at low risk of financial freeze.

Therefore, the many departmental Excel sheets have been eliminated because it has been possible to incorporate all the types of costs that pertain to each department with greater reliability. The financial shocks were reduced in number and severity by anticipating their identification by suddenly taking countermeasures. All this has allowed the company to grow at a rapid pace.

Adapting the PHPRunner application to the individual cost and revenue forecasting logics of each department was easy, fast and economical. Therefore, everyone happy!

The company ERP, with which the forecast budget data must be compared, has a standard and rigorous accounting logic. The managers easily compared the data but over time, with the company’s growth launched, the time dedicated by the managers turned out to be high and had to be reduced and the solution was in the automatic feeding of the data and in the ability to integrate with the ERP and in the manual modifications reduced to a minimum by the operators at every level and in the automatic forecasting capacity by inserting increasingly sophisticated algorithms, enriching with graphs that immediately highlighted the incoming decision-making nodes.

In practice, it was necessary to make the programming of the algorithms more complex and to make the data representation more sophisticated by reducing the manual input through greater integration with all the other specific company applications: project management platforms, CRM, digital marketing, websites, etc. etc..

Under these conditions PHPRunner left its comfort zone and it was necessary to rewrite the PHPRunner application using more generalist languages in classic development environments: DotNet, Java, PHP, WordPress, Python, C++ etc..

Was there a solution of integrating PHPRunner modules with alien modules?

It was found with the integration with WordPress and its 50,000 plug-ins and Dot Net with the robustness of algorithms in Java and C++.

Since then, the replacement of critical PHPRunner modules with optimal modules for presentation and development has not had any bumps in delivery times and has not had significant jumps in development estimates.

Download the case history, please

Reference: fhumanes.com

Last Updated on February 13, 2024

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Last Updated on February 13, 2024