Preparing the year-end budgeting is a must for every company. The preparation usually takes place at the end of the year based on how much the company spends in the current year.
We prepare the year-end budgeting to figure out how much we have to spend next year and avoid over-expenses. Year-end budgeting is important so you don’t have to buy things you don’t need later on.
So, what are the things you have to consider when preparing year-end budgeting? Here are some of them:
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Consider the time to prepare year-end budgeting
Choosing the financial model, followed by allocating next year’s budget is very time-consuming. If you choose to work on this task in the last days of December, it’s quite possible you won’t finish the task.
It’s quite common for employees to go on leave during Christmas and new year holidays. That’s why some companies do the preparation before the holidays close in. The other options are hiring professionals to do the job for you or using an accounting system to make the job easier.
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Assign people who will supervise your work
Using accounting software is the right approach to make supervising easier. Assigning managers to supervise your work is easier with the cloud sharing feature.
But if you still using Excel documents to create a year-end budget, don’t forget to share the documents with your managers or head department to make it easier for them to supervise your work. This also enables your managers and the head department to provide input during the process.
Make sure you have access to the documents you need
When working on the year-end budgeting, you will have to take a close look at important documents such as purchase order documents. If your company already implemented an accounting system, all you need to do is ask for permission to access those documents.
If you still create purchase orders manually, then you have to do one more step after getting permission. You also have to search where the document is being stored and put it back after you are done with it.
Consider the year-end budgeting allocation method
The most common way to do year-end budgeting is by calculating the spending of each department in the company. A lot of companies still use this method since it’s time-efficient.
The second method is Zero Based on Budgeting. Instead of calculating what your company has done in the past, you project what each department in the company will do in the next year. This method is very time-consuming and requires cooperation from each department in your company. But the accuracy of this method is a far cry from the first method.
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Yes, preparing the year-end budget is not an easy task and requires cooperation from everyone in the company for you to be able to access certain documents or to determine what your company will be doing in the next year if you are using Zero Based Budgeting. That’s why implementing the accounting system in your company is important.