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Budgeting Software – 5 Common Budgeting Mistakes to Avoid

Roger Knocker • November 25, 2023

Budgeting Software – 5 Common Budgeting Mistakes to Avoid


Having the correct budgeting software helps to avoid common budgeting and forecasting mistakes. Too many small to medium sized businesses still rely on spreadsheets for budgeting. With spreadsheets known for containing calculation, input, formula and modelling errors, it is no surprise that reliance on the spreadsheet models leads to miscalculations and time wastage.


Repetitive tasks cannot be automated with spreadsheet models and collaboration is difficult. Keeping record of which spreadsheet is the latest available is also difficult, and searching through countless lines of data to find errors takes time. Time equates to money in the competitive business world of today, so time spent on finding errors thus means money lost.


Instead of relying on spreadsheets, companies should use appropriate budgeting software that is scalable according to the company’s growth. Such software enables input from various persons, without causing confusion as to which model is the most up to date. It also enables the setting of various scenarios, and shortens the time from budgeting to approval. With such budgeting software, it is possible to adapt the budget according to the real needs of various departments in line with the organisational goals, instead of working in silos and having departments compete for funds to further their own agendas.


Now that it is established that budgeting software, as available from KPI Management Solutions, is the first step towards streamlining of the budgeting process and ensuring accurate decision-making faster, because of availability of information, let’s take a look at some of the common budgeting mistakes made by small to medium sized businesses, and how to avoid such.


1. Not making provision for expense fluctuations 


Spreadsheets make updating and adapting the budget difficult, because changes in one worksheet may require changes across many worksheets. As a result, many business owners work with rather rigid budgets, and don’t make provisions for fluctuations in expenses. Some expenses fluctuate quarterly, others monthly. The company can, for instance, spend more money with lower income during the winter months, if tourism is its main business activity. If the budget doesn’t make provisions for fluctuations in expenditure, then it is difficult to benefit from cost savings. It also hinders the executive management’s ability to have accurate insight into the company’s finances. It is thus essential to ensure that the budget is flexible enough to accommodate for fluctuations and unexpected costs.



2. Only doing monthly checking of costs and receipts


Many things can change in one month. Waiting until the month-end to track or review expenditure can leave the business without enough cash flow for the next month. Apart from poor management practices, cash flow problems are the main reason for business failures, especially in the start-up months. Expenditures must be tracked weekly, ensuring a closer tab on the costs, and thus cash flow management. At the same time, it is important to track the receipts for the expenditures when the purchases and payments are made. This helps to prevent over spending.


3. Over complicating the budget 


Using expensive budgeting software that is too difficult to use or understand frustrates the managers, and at the end of the day, it leads to inaccuracies. If extensive training is required to use the budgeting software, then it is time to switch to a new sophisticated, yet easy-to-use and understand, budgeting solution, as available from us. This will ensure accurate budgeting, tracking, analysis, forecasting and reporting.


4. Unrealistic income projections 


Although it is certainly good to be optimistic in life, when it comes to business income projections, being conservative in estimates is better than dreaming beyond realistic income projections. It is important to review past income patterns, market conditions, competitors and client base growth when making income projections. Just pulling figures from the air and hoping that sales will meet expectations is day dreaming, and the business world is about realistic figures. It is thus essential to keep close tabs on changes in the business landscape, in addition to reviewing historical performance. This is possible when using the correct budgeting software.


5. Underestimating expenses 


The same applies to expenses. Don’t underestimate the cost of sales. All past, current and future expenses must be taken into consideration. Prices change, and changes in the political and economic landscape, locally and internationally, affect prices related to material production, transportation, advertising, online marketing, labour, utility accounts, taxes, travel costs, shipment, and more. Every expense must be reviewed to determine how cost savings can be accomplished.


Get the right tools for budgeting, and follow sound budgeting and forecasting principles to ensure business success. View our solutions and call on our expertise to help your company budget accurately.

By Clerissa Holm March 18, 2025
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Financial KPIs Every CFO Should Track in 2025
By Clerissa Holm February 17, 2025
In the ever-evolving financial landscape of 2025, CFOs are tasked with navigating complexities ranging from global economic shifts to technological advancements. The ability to track and analyse the right financial Key Performance Indicators (KPIs) is no longer a luxury but a necessity. These metrics not only provide insight into an organisation’s financial health but also support strategic decision-making. Here are the top financial KPIs every CFO should prioritise in 2025: 1. Revenue Growth Rate Revenue growth is a clear indicator of a company’s ability to generate sales over time. This KPI allows CFOs to evaluate the success of business strategies and identify trends in market demand. Formula: Revenue Growth Rate = [(Current Period Revenue - Previous Period Revenue) / Previous Period Revenue] x 100 Why It Matters: Monitoring revenue growth helps CFOs assess performance against strategic goals and anticipate future cash flow needs. 2. Gross Profit Margin Gross profit margin measures the profitability of core business operations, excluding indirect costs like administrative expenses. Formula: Gross Profit Margin = [(Revenue - Cost of Goods Sold) / Revenue] x 100 Why It Matters: It reveals the efficiency of production processes and pricing strategies, enabling CFOs to identify areas for improvement. 3. Net Profit Margin While gross profit focuses on operational profitability, net profit margin considers all expenses, including taxes and interest. Formula: Net Profit Margin = (Net Income / Revenue) x 100 Why It Matters: A high net profit margin indicates strong financial health and the ability to manage expenses effectively. 4. Cash Conversion Cycle (CCC) The CCC measures how quickly a company can convert its investments in inventory and receivables into cash flow. Formula: CCC = Days Inventory Outstanding + Days Sales Outstanding - Days Payables Outstanding Why It Matters: In 2025, with supply chain disruptions and rising interest rates, efficient cash flow management is critical. The CCC helps CFOs identify bottlenecks and optimise working capital. 5. Operating Expense Ratio (OER) This KPI compares operating expenses to revenue, offering insights into cost management. Formula: OER = (Operating Expenses / Revenue) x 100 Why It Matters: Keeping operating expenses in check is vital for maintaining profitability, especially in uncertain economic climates. 6. Debt-to-Equity Ratio This KPI highlights the financial leverage of the company by comparing total liabilities to shareholder equity. Formula: Debt-to-Equity Ratio = Total Liabilities / Shareholder Equity Why It Matters: With interest rates fluctuating in 2025, maintaining a healthy balance between debt and equity is crucial to avoid over-leveraging. 7. Return on Equity (ROE) ROE measures the efficiency of a company in generating profits from shareholders' investments. Formula: ROE = (Net Income / Shareholder Equity) x 100 Why It Matters: A strong ROE signals to investors that the company is effectively using their capital, which is vital for securing future funding. 8. Earnings Before Interest, Taxes, Depreciation, and Amortisation (EBITDA) EBITDA provides a clear picture of operational profitability without the influence of financing and accounting decisions. F ormula: EBITDA = Net Income + Interest + Taxes + Depreciation + Amortisation Why It Matters: CFOs use EBITDA to benchmark performance against competitors and industry standards, making it a key metric for strategic planning. 9. Customer Acquisition Cost (CAC) As businesses invest in growth strategies, understanding the cost of acquiring new customers becomes crucial. Formula: CAC = Total Sales and Marketing Expenses / Number of New Customers Acquired Why It Matters: Tracking CAC helps CFOs ensure marketing spend aligns with long-term profitability goals. 10. Economic Value Added (EVA) EVA measures the value a company generates beyond the required return of its shareholders. Formula: EVA = Net Operating Profit After Taxes (NOPAT) - (Capital Employed x Cost of Capital) Why It Matters: EVA provides a holistic view of financial performance, emphasising value creation over short-term profits. Final Thoughts In 2025, CFOs must adopt a forward-thinking approach, leveraging advanced analytics and real-time reporting tools to stay ahead. By focusing on these essential financial KPIs, CFOs can drive strategic growth, ensure resilience, and foster long-term success in an increasingly competitive landscape. Tracking these metrics isn’t just about numbers; it’s about enabling informed decisions that align with the company’s vision and goals.
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