Have you ever been required to cut your budget and costs, but didn’t know specifically what you were buying or spending? After reading the Sunday paper a few weeks ago, I couldn’t help but share this Dilbert comic.
Managing every budget is important to the bottom line, no matter how big or small. Cutting costs and improving your bottom line help keep your business running, growing, and competing. Spend Radar can help you uncover savings areas by better understanding your spend within your budget.
Here are three steps to understanding your budget spend:
- Collect and gather spend data and related fields like department, business unit, cost center, GL code, and division. The deeper and more detailed your data is (with additional fields like functional area, segment, profit center, location, region, category manager, EVP, etc.), the easier savings allocations become. This type of data adds valuable information to your budgeting insights and helps you target specific areas of spend.
- Break down the data. This is where you can track your spend against your budget. Being able to view the percent of budget and percent of spend for a particular field makes it easier to manage spend and provide each department with a fair budget, given your expected savings. If your spend is less than your budget in a given area for a projected time frame, you can track the “delta” (or difference) and allocate the remaining spend dollars to an area with a high delta percentage, where the spend exceeds the budget (typically in areas where costs are unknown, e.g., utilities).
- Analyze, report, and forecast. There are a number of ways to analyze your data. Individual graphs or charts can provide granular detail where needed. You can also focus on the full budget data report to help track overall budget in multiple departments. You can pinpoint areas where you may need to factor slack, monitor overspending and underspending, and identify routinely fixed or controlled costs. If needed, specific look-up tables can be brought in to help track spend allocated for a specific data field.
Budgeting is a key process to growing a business, capturing savings, and avoiding deficits. The level of data you are able to provide can help to forecast and estimate current and future spending.
By knowing more detailed information across all areas of your business, you can operate more effectively, get more detailed and comprehensive data related to your budget spend, and manage your organizational costs.
Have you used spend analytics to help your budget management?
Image: Alan Cleaver
Kelly True, Senior Solutions Consultant, Spend Radar
(c) 2011 Spend Radar
