In the dynamic and ever-evolving landscape of today’s business world, traditional budgeting methods may be insufficient for companies striving to stay agile and responsive. Enter flexible budgeting: a paradigm shift that is gaining momentum as a new standard for financial planning. This approach allows businesses to navigate uncertainties, adapt to changing market conditions, and optimize resource allocation for sustained growth. In this article, we explore the key principles and benefits of flexible budgeting.
According to a recent survey conducted by PE-CXO, 73.8% of respondents stated that overall economic uncertainty has posed the greatest threat to their budgetary planning process this year.
CFOs, in partnership with management teams, are facing the stark reality that they must plan for a number of unpredictable scenarios due to potential ongoing market volatility. More than ever, a focus on cash flow generation, cost reduction and other targeted measures to boost the bottom line are vital to recession-proofing budgets.
To embrace agility and adapt your financial planning to evolving times, refer to the below guidance.
Macro Factors Impacting the Budgeting Process
69.7% of respondents reported that their budget process has been more challenging in comparison to last year
— PE-CXO survey
Unsurprisingly, most respondents attributed the increased levels of budgeting difficulty to the macroeconomic environment. Some specific challenges cited include: supply chain constraints, high cost of capital amidst inflation, a reluctance to increase prices due to consumer confidence levels and increased investor scrutiny.
And, more specific to PE, CXOs must also plan for returns and gr...