Control Company Costs
When Strategy Meets Spending: An SAP Concur Podcast Conversation on Zero Based Budgeting with Accenture
So much has changed in the past couple of years, and nearly every shift has impacted organizational budgets in some form. Rather than making deep cuts with percentage-based reductions when planning, organizations have the chance to do more with zero-based budgeting. The right technologies and systems allow greater visibility, flexibility, and overall savings. Moving forward, a well-planned budget transformation can give employees greater insight into the role they play, while generating growth for the company.
Alberto Herrera, Senior Value Consultant for SAP Concur, discussed best practices for leading optimization strategies and focusing on value when allocating resources with James Portnoy, Senior Strategy and Consulting Manager at Accenture, and Manoj Das, Managing Director of Human Experience Management for Accenture.
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Budgeting with “Why?” vs “How Much?”
Zero-based budgeting, at its core, doesn’t use the previous year as a starting point to develop the upcoming budget. “You’re really starting from scratch in certain areas of spend, like travel and meetings,” Portnoy says. “It makes the budget holders and employees think through what they need to spend in order to achieve the overarching business strategy.” The exercise can help everyone focus on cost allocation and keep careful tabs on expenses.
“Zero-based budgeting is not a cost-cutting measure; it’s a way to allocate resources to your business strategy.”
Spending Where It Matters
The best time to switch to zero-based budgeting? It might be now. “The assumption of whatever we spent last year is a good indicator for what we should be spending this year on a category-by-category basis doesn’t necessarily hold true anymore,” Portnoy says. What was allocated for PPE and travel in 2019 may have been quite different than the amount spent in 2020, with 2021 bringing further variance. For companies looking to grow, thinking through how every dollar is spent can be a great technique that breaks down expense barriers.
“Some companies use zero-based budgeting as an aggressive cost cutting tool, while other organizations use it as a way to get better visibility and be more granular in terms of how they do their financial planning.”
When implementing zero-based budgeting, leadership involvement can help pave the path for change. “It’s a way to demonstrate that the organization is serious about adopting this new budgeting process—this new culture of cost consciousness,” Portnoy explains. “If you have the right communication to employees, they’ll see money is being put where it matters.”
Tech Assistance to Truly Transform
When undergoing a budget transformation, Das says, “You need a system that can hold the budget information—the financial system. Then you need all the systems that will provide the necessary input, and the inputs need to be tracked.” This reporting can provide insights into the variations from the budget.
If a travel budget is missed, for instance, compliance on policies can be reviewed. “Am I following the number of hotel nights I’m allotted?” Portnoy explains. “Having that operational reporting to understand the deviations in the financials is something we’re seeing a lot of companies want to get their hands around.”
With the right technology, organizations gain a granular look at spend in an ongoing, automated, and sustainable way—one which fuels long-term growth and profitability.