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    Senior Finance Executive ~
    Change Catalyst ~
    Highly-Adaptable Leader

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New Year, New Budget … but is it the right tool?

There is always something exciting about starting a new year.  It’s like having a clean slate so to speak.  Oh, it doesn’t mean that what has happened to you in the past disappears but it’s a point from which to start measuring new challenges and new initiatives.  This is true whether you are an individual or a business.  Individuals use resolutions to set up these challenges and initiatives, many of which will fall by the wayside before the end of January.  For a business, it often means the beginning of a new budget and that too can fall by the wayside quickly.

A budget can be a dangerous business tool when its weaknesses are not well understood and too much faith is put in it.  The budget that was created last year, after many months of work, represents a best guess about where the business will be this year given the set of assumptions made at the time the budget was created.  But we all know that the assumptions can become skewed or change as the economy ebbs and flows.  And as a result, measurement against a static budget isn’t always going to lead you in the right direction.  So what do you do to avoid the budget becoming a wasted effort and the nemesis of everyone in your company?

I recently read “Beyond Budgeting”, a book addressing the weaknesses of the traditional budgeting process and how to combat it.  The authors promoted the idea that the budget can be done away with and gave a number of case studies attesting to the success of this method.  However, the budgeting process is so deeply ingrained in the American business psyche that only a handful of companies will ever be able to achieve this nirvana.  Instead, there are a number of tools that I have worked with in the past that can help make the budget more valuable and supplement it to drive growth.

  • Flex budgeting
  • Balanced scorecard
  • Benchmarking
  • Incentivizing the right way

I will be discussing each of these tools in posts throughout the coming week starting with flex budgeting.

Wishing everyone a Happy and Prosperous New Year!


Welcome to The Finance Compass

I’ve been thinking about starting a blog to discuss finance and accounting issues and decided what a better time to start than 2010!  The past year has been fraught with challenges for everyone and now more than ever it is so important to share ideas and get an open dialogue going on what we need to do to make business better.

Although this blog is aimed at finance and accounting, my intent is to make it not overly technical so the content can be valuable to anyone in business regardless of position.  I also realize many of my accounting and finance counterparts will be familiar with some of the concepts and materials I present here.  Often times though, we get caught up in the way we’ve always done things and we forget about things that can make our lives easier or can bring improvements to our business.  Hopefully the posts in this blog will jog your memories and prompt you to go back to explore the things you know.

Starting this week, I will be posting a series about budgeting and related measurement tools.  I know that for many companies the budgeting process is months away but I believe it is vital to start thinking now about how to make it better.  We all know once the budgeting cycle starts, it is too crazy to take a step back and ensure we are headed in the right direction, and that the fruits of our labor will actually mean something.

I welcome all of you to The Finance Compass and trust you will find it informative, thought-provoking and a “must read”!

Merry Christmas

Wishing everyone a very Merry Christmas!  May the best of the season belong to you and your family.

Stay tuned

I’ll be starting my blog in the new year.  Stay tuned!!