Using the Balanced Scorecard as a Budgeting Tool

Many business owners assume that the budget process is simple and can be easily estimated. However, it is important to understand your business and the factors that reflect your strategic growth plan. Next year’s budget should spark some questions:

• What measurements are currently taken to determine the budget?
• How will a budget be determined if there is not a balanced view of the company?

In the fourth quarter businesses often utilize the simplified approach to budgeting by reviewing past performance--whether it be revenues, profits, or return on investments--and use those factors as key indicators for forecasting the next year. As recent years has shown us, the reality is that there are many factors that can affect what is going to happen next year, or even tomorrow. While developing a budget cannot take months to complete for the small business, a little time should be spent understanding the factors that will play into the next year beyond historic financial records. We encourage business owners to complete this process in the month of November. Larger companies too often waste time and energy fighting over who gets the money, and do not have an understanding of where the company is going.

One tool for use in the budgeting process is the Balanced Scorecard. The Balanced Scorecard identifies and measures key performance indicators that align a company’s performance with all of their future goals. The Balanced Scorecard makes budgeting an efficient process, which is important for every small business owner.

Click here to read and print the entire article in PDF.

Click here to watch a complementary webinar featuring CEO and Managing Director Philip Clements and balance scorecard expert David Faircloth, Cathedral Managing Director in the New Jersey office, as they discuss their experiences with the budget process and how the Balanced Scorecard can be implemented for next year's budgeting process.