What is the First Stage of Financial Accountability?

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Financial accountability is at the core of every successful corporation, ensuring transparency in using funds. Organisations face mismanagement, operational instability, employee dissatisfaction, and more without robust financial accountability reporting. As the famous Enron bankruptcy depicts, financial mismanagement can wreak havoc on a corporation.

While there are several financial accountability, the first budgeting stage matters most. Let’s discuss why it holds so much weight and how it plays out in the corporate context.

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What is a Budget, and Why Does it Matter?

A budget is a projection of expenses a business expects to incur over a given period, such as a month or a year. Budgeting helps companies plan their future investments, anticipate operational changes, and reach various business goals they deem valuable. Similarly, it allows corporations to track the performance of their investments by understanding operating costs.

Budgeting: A Brief Breakdown

Maintaining business operations requires consistently paying for several items, including hardware and software. Detailed budgetary planning allows companies to make future projections and prevent debt accumulation. Similarly, they can create detailed reports for multiple investors to help them understand the company’s future direction.

Without a budget, companies face several issues, including poor investment choices, overspending, and, in extreme cases, dissolution.

Here are a few things businesses create budgets for:

Payroll: Salaries of all existing employees, including the management.
Rent: Many companies pay rent for office space, warehouses, or other spaces.
Utilities: Utility bills for electricity, water, internet, phone, and the like.
Insurance: Companies often acquire various insurance, such as liability and property insurance.
Professional Services: Today, many companies rely on third-party IT and repair services to keep their operations running.
Advertising: Businesses often promote their products on various platforms, from TV to social media, which requires a hefty amount of money.

Loans: When companies don’t make enough profits or want to expand, they take loans to cover their expenses and financial obligations.

Advantages of Budgetary Planning

Elaborate budgetary planning helps companies plan for short- and long-term hiring, expansion, and other expenses. Here are the major benefits it brings to an organisation.

Attracting Investment

Many investors prioritise financial accountability, as they want to see if the company is financially prudent. A well-structured budget and spending mechanisms show that a business is committed to financial accountability. Seeing that a company has its finances and obligations sorted out makes investors more confident in investing in it.

Meeting Financial Goals

Every company sets financial goals for the year, and meeting them means it has the space to expand or continue at the same pace. A company will never know how it’s doing without a robust budgeting plan. Instead, it might discover at the end of the year that it didn’t turn a profit. Budgeting helps the company and the investors understand where the money is coming from and where it’s being spent.

When you set financial goals, they should be achievable enough to guide other budget allocations. They also determine your spending course in the long run for better financial accountability.

Budgeting helps you inform employees about your progress toward different goals. For instance, if you set the target of gaining 5,000 new users but only got 2,000, where did it go wrong? Could you do it a bit differently to alter the results? Were there other resources that could have taken you closer to your target?

Financial tracking lets you put your team in the right place at the right time, allowing you to reach your targets more efficiently.

Helps With Project Prioritization

One advantage (and byproduct) of budgeting is that it pushes you to prioritise projects. You do that by comparing the return on investment (ROI) for each project, their alignment with your corporate values, and how they’ll impact your broad financial targets. This approach helps you determine the value in each line of investment and explain it to your investors, ensuring that you only spend on projects that matter.

Provides a Pivot

The business world is mercurial, where unexpected events hit you out of nowhere and derail your regular operations. The most pertinent example here is COVID-19, which resulted in lockdowns and travel bans with far-reaching impacts. Businesses had to quickly reconsider their budgets and design them to account for a new reality.

Even after the disappearance of COVID, companies are still trying to create budgets that could serve as a pivot if needed. COVID made businesses turn towards zero-base budgeting to rely on minimum resources to survive unfavourable circumstances.

An Overview of Advantages of Budgeting for Financial Accountability

Advantage	Description
More In vestment	Budgeting helps bring more investment, as it makes investors trust you.
Meeting Financial Goals	Helps you set financial goals and meet them efficiently.
Project Prioritization	Helps you prioritise projects by comparing their ROI and alignment with broad financial goals.
A Strong Pivot	Serves as a strong pivot during uncertain times.

Conclusion

Budgeting should be a top priority of any organisation trying to be financially accountable. It shows the effectiveness of your investment strategies and whether investors are willing to bet on you.

Achieving peak organisational accountability can be a tough task. However, with the right guidance from a qualified mentor, you can definitely do it. If you’re also willing to bring more financial accountability to your organisation, I’m here to help.

With my years of experience in the corporate sector and as a trainer, I have the right tools and knowledge to make your organisation financially prudent and more productive.

So, reach out to me today and start a new journey of financial accountability.

About The Author

Darren Finkelstein, The Accountability Guy®, is the founder of TICK THOSE BOXES, a specialised accountability coaching practice. Darren is a formidable international accountability coach, business advisor, mentor, and author/speaker, fostering development and measurable results in entrepreneurship, leadership, and accountability. Darren’s tale is one of perseverance, self-reinvention, and resilience.

With compelling execution, Darren has empowered high-achieving individuals and teams from Australia and New Zealand to Latin America, Europe, Asia, the UK, and the US to embrace accountability; after all, it is your superpower.

Darren’s one-on-one and group coaching programs are based on his bestselling business book, “The Accountability Advantage – Play your best game” and the latest, release “NO’ – Building a life of choice without obligation”.

Darren has an impressive background in business, having held the role of “Manager of Commercial Markets” at Apple Australia during the Steve Jobs revolution.

He enthusiastically “walks the talk,” having also successfully sold and exited his lifestyle businesses, which served as the impetus for establishing his coaching and mentoring business.

Join Darren on this transformative quest to accomplish the remarkable.

Read Darren’s full bio here:
https://tickthoseboxes.com.au/about/