What are cutting-edge ways to tweak your budget process and achieve peak efficiency? Consider the following best practices:

Establish a link between what your company does and what you spend money on.
Form a cross-functional team from different departments to help gather that information. Identify your most important and cost-intensive activities. Find out the real costs of these activities. You may discover you're spending too much on activities that don't add much value and not enough on those which do. Use that information to adjust how money is allocated.

Think about important business drivers.
Try to identify the five things that your business revolves around, whether it's customer satisfaction, product development, or intellectual capital. How many of the things you identify are being under-funded?

Gain consensus outside the finance function about key performance measures.
Is your company more interested in ROI than customer retention? Develop a cross-functional team to seek the answers and make certain that the team gains validation of the measures from people throughout the company. Then make them the key set of measures of performance within the planning process. A well-tuned budget incorporates strategic planning, financial planning, forecasting and scorecard reporting.

Tie compensation to budget goals.
People have to care about the budget plan and about meeting their performance targets. Make sure the reward mechanism is based on things people can control and influence. Otherwise, the budget process will be a source of ongoing frustration.

Reduce the number of budget line items.
Stamp out minutia and concentrate on actions and activities. Example: Do you need a number of lines under the expense category, or could you live with just one line item for expenses? Your goal? Limit your budget to no more than 40 line items.

Don't make forecasts in a vacuum.
Your sales and marketing people may have some valuable ideas about product forecasts. Tap that expertise.

Reduce the time it takes.
If your budget planning process normally takes three to four months, reduce that time by one month, by reducing the number of line items in the budget.

Allow managers flexibility to meet their targets.
Don't hold people accountable to a tactic that was conceived six or nine months ago. Maybe the manager has found a better way to meet budgeted targets. Move from a static process to a dynamic process.

Don't be shackled by calendar-based or fiscal-based forecasts.
A calendar-based budget isn't flexible enough to respond to changes in the marketplace. Let's say you develop a 12-month budget that ends on December 31, 2007. But in March 2007, your company launches a new product. The calendar-based budget that's already in place can't allocate more resources to the new product rollout because the numbers for each department are already set. The end result? You're stuck with that budget for the next nine months, and your company's new product rollout doesn't have the funding it needs to succeed.

Take at look at Sage Active Planner.
Free yourself from time-consuming spreadsheet mechanics and focus on strategic budgeting and planning. With more control over your budgeting and planning process, you'll be able to create effective, more accurate budgets and forecasts and render a true analysis of company performance.