2024 is fast approaching - and with it comes the need to build your 2024 budget.
It is the last piece of the 2024 puzzle - combined with the strategy and yearly plan.
And to help you create your budget seamlessly, we set down with Doron Shohet, VP of FP&A at Yotpo, to bust some myths that you might have about budget building. And to share insights on how to make the process as easy as possible.
The budget needs to be high-level and not detailed
False! The more detailed the budget is - the higher the likelihood of it getting approved.
Finance might not fully understand the title of each of our activities, but providing details and clarity can assist with it.
When building the structure for your budget, take into account the seasonality of it - usually, we have peak times for branding (Such as the beginning of the new year) and lull times - including those milestones into the plan will help predict better when the budget will be needed and eliminate surprises.
The budget is a reflection of the current fiscal year goals.
False! The budget needs to reflect not only the current fiscal year but where we want to be in 3-5 years, what’s the strategy and goals and how I can create short-term goals to help achieve that. Think of the current fiscal year as the infrastructure - whereas the following years will be built based on. That approach helps us make difficult decisions - because we're looking ahead and not just focused on the short-term goals.
The Budget should be focused on expenses only
False! The budget should be a reflection of the current financial state - What requirements and activities will be carried over from the previous year, and what resources are available?
Then, examine the future state (what we’ve created in the strategy and yearly plan) compared to the current state - honing down on where I need additional budget, where I have extra budget, and where I want to invest it.
Once approved, The Budget is static and should not changed (or dealt with) throughout the year
False! The Budget is not one-and-done - It’s constantly changing. Just as goals change and evolve, so does the budget. We need to be flexible to change the budget (and plans), keep track of it, and ensure we’re utilizing it fully.
Plus, one myth finance doesn’t want you to know about...
Adding unexpected expenses into your budget is a great way to get a budget cut - instead, add a small buffer to each section of your budget. Our rule of thumb is between 5-10%. That will allow room in case prices rise, or any last-minute changes are necessary.
Not sure how to turn our advice into a budget? We’ve got you covered - our free budget template is here to help streamline the process.
