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We've outlined some extreme examples of how corporate budgeting and subsequent performance metrics can ultimately lead to lost business opportunities. Those business opportunities translate to higher operating costs and lost profit.

The problem is that the nature of the budgeting process that has been adopted into most business, those opportunities for savings and business improvements are never even brought to light. Department managers and stakeholders are primarily concerned with their job responsibilities that they are measured against, not against corporate profitability or efficiency. The IT team wants systems to experience 100% up-time on the network and equipment. Marketing wants to maximize the exposure of its message. Facilities want to keep equipment running as to not disrupt production or manufacturing. Engineering wants the latest and greatest products and innovation. None of these departments want to be burdened down with budgets and planning.

Companies need to do a better job of aligning corporate goals to individual and staff metrics, and they have to learn to stop using budgets as an excuse for not becoming world-class performers. Finance departments and executives need to learn that there are better metrics for measuring the performance of a business group than how much money they operate with. Tighter controls and mechanisms need to be put in place to truly understand lost savings opportunities or to justify increases in spending. A Budget is not something that should be discussed once a year, and the rest of the year spent working to stay within it. Budgets shouldn't be an excuse to defer a conversation about business process changes or the need for additional help, when each day that you don’t take action you could be losing savings opportunities.

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If you need help understanding the pitfalls of budgeting or if you would like to see the future of savings opportunity tracking and cost compliance, reach out to Source One.
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William Dorn

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