Planning and Budgeting: Top-down, bottom-up, or business model-based?

Many SME accounting packages offer the option to plan or budget at the general ledger account level. However, entering a figure for every GL account every month is time-consuming and far too detailed. It becomes easier if you can budget at a higher level, such as 'wages'. But even then, you still have to enter a figure 12 times, with the supporting documentation hopefully stored somewhere in an Excel sheet.

The ideal approach is to enter your business model into your budgeting software once, taking into account seasonal influences and the fact that employees will leave and join throughout the year. The business model contains a structure where you plan, for example, the number of products sold or hours worked multiplied by a rate. In addition, fixed and variable costs are included in the model. In this way, all assumptions are captured in the model, allowing you to plan ahead effectively.

Smartbooks supports budgeting based on your business model and ensures that an annual plan can be easily adjusted and recalculated. You can also place an alternative scenario alongside the budget and actual figures. This allows you to keep a close eye on whether revenue, costs, and cash flow are developing as planned on a monthly basis.