Discuss FIVE (5) common challenges in company budgeting.

1. Inaccuracies in the data: A business can consist of a lot of departments such as

recruiting, resource management, marketing and product development which all
have their own expenses. Collating a list of expenses for all these departments
correctly can be a monumental task. Often there are inaccuracies in the data
collected which can have a major impact on the allocation of resources in the
budget.

2. Lack of modifying: In most cases, businesses create budgets before the start of a
fiscal year based on various financial and economic factors at that current time.
However, not revisiting the budget regularly or modifying it as per the latest trends
can result in the mismanagement of resources and can place you behind your
competitors.

3. Excessive focus on financial outcomes: Since earning revenue and profits is a major
component of how businesses measure their growth, most budgets focus on
achieving the financial goals of the company and tend to overlook the need of
improving the qualitative aspects of the business such as employee engagement or
workplace satisfaction. Although these factors may not directly contribute to the
growth of a business, including them in the budget can improve your company’s
work performance and standing in the business community in the long run.

4. Lack of time to create a budget: Creating a well-organised budget requires careful

consideration of a number of factors and this can be very time-consuming.
Unfortunately, the budgeting process is usually left to be completed at the end of a
fiscal year when there is shortage of time and resources. This can produce
inaccuracies in the budget which can be harmful for your business.

5. Unwillingness to change expenditure habits: Most company budgets are usually

similar versions of the previous years’ budgets with very few changes. The annual
expenditure of different departments sets the tone for their funding in the next
budget. This might encourage some departments to indulge in over-expenditure
which can waste limited resources, especially in a smaller company.