Before you frown when you hear the word “budget”, remember that the problem is almost never the budget itself, but the way it is built. Does it obey a collective construction or a small group disconnected from reality? Is it a flexible guide or a straitjacket that won’t let you breathe? A good financial planning exercise must be a dynamic, measurable and flexible guide, built from a vision shared by the entire company.
The budget: a guide, not a ritual
Each company is a particular universe, with its own culture and its way of relating. There is no single correct formula for building a budget: the important thing is that the process is aligned with the way the organization operates and communicates. A useful budget is one that becomes a shared roadmap, not a document that is not the day-to-day document of the team.
Among the different budgeting methodologies, the Rolling Budget is one of the most powerful and aligned with current challenges, especially when it is built with the collective commitment of the team. Its great advantage is adaptability: by regularly updating —usually each quarter— it allows to quickly incorporate market changes and facilitate the strategic reallocation of resources, something that rigid annual budgets do not allow. In addition, it improves communication and organizational alignment, turning quarterly reviews into true spaces for reflection and heading adjustment.
How to build a Rolling Budget
- Define the budget horizon: 12 months is a good reference.
- Define the periodicity of update according to the dynamism of your business: monthly, bimonthly or quarterly.
- Collect historical data, trends, patterns and external variables (inflation, devaluation, regulations).
- Design friendly and aligned templates with your accounting plan or management accounting.
- Secure the necessary resources—people, budget, and, if possible, software tools—to sustain the process over time.
- Establish a working government with the areas responsible for defining priorities, objectives and resources.
- Make monthly follow-up with a construction approach, not signage: the space is to understand what is happening and adjust the course.
- Update with the defined periodicity, replacing the executed period with real data and extending the horizon forward.
The basis of the rolling is flexibility: it must be easy to review and adjust, have the commitment of senior management and rely on a financial planning area that makes it friendly to all those responsible.
The sales projection: the main driver
A robust financial planning exercise must be based on several elements, with the sales projection being perhaps the base budget for the construction of the other projections. Sales act as the main driver of budgeting, with an important nuance: the focus must be on achieving profitable sales, not just sales.
There is no single formula for developing a sales budget: each organization must identify the most important inductors of its sales. Some key fronts to review to define the price x quantity of a period:
- Market environment: market cycle, impact of new technologies and digital channels, consumer behavior, regulatory framework and macroeconomic environment, movements of the competition.
- Internal factors: performance and costs of distribution channels, marketing strategies and prices, commercial team capacity, operational capacity and available inventory, resources and technology (CRM, automation).
- Historical data: Sales trends by product, customer or channel, seasonal patterns, impact of previous campaigns.
- Temporal aspects: Budget periodicity, sales cycle duration, seasonality and delivery times.
For the detailed construction, it is advisable to break down the budget as much as possible —by customer, zone, channel or product— and define, under a rolling forecast methodology, the frequency of updates, those responsible, the review and approval process, and the monitoring tools. A delicate point: if the sales budget will be the basis for the payment of commissions, it is key to define it with transparency from the beginning, to avoid tensions or “mattresses” in the goals.
Clarus Council: A budget only works if those who must execute it feel it’s own. Discipline is not imposed: it is built.
At Clarus Consultores we designed together with your team a dynamic and collaborative financial planning process, adapted to the language of your company. Let’s talk about how to structure yours.