The term budget tracking refers to the process all businesses must engage in to track expenses. It involves the tracking of receipts, invoices, and other data to determine what the company is spending on various areas of the business, such as on the development of a project. This tracking process ensures that expenses are understood, and projects remain within their allotted budget.
There are various tools for budget tracking that work to eliminate the manual process. Most budget tracking today is done using budgeting and forecasting software. When budget tracking through an expense tracker is used, it allows for all budget details anticipated within the project to be understood. It may also help with understanding how well expenses relate to profit goals for the specific project.
There are numerous benefits to using this type of project budget software or budget app. Most importantly, it helps companies and teams manage where their money is going, providing real-time access to spending to ensure they stay on track with their financial obligations. If there are situations where the company is overspending, that could impact cash flow. With a budget planner like this, companies can recognize concerns about running out of money, make changes quickly, and ensure that they are able to continue to make their monthly expenses going forward, or it may require the company to reassess their expenses and create new goals that better align with reality.
With the help of a tool like this, companies can first establish financial goals for the month (or other period of time) and then track what they spend in various areas of that project. It then allows teams the opportunity to offset extra expenses before it becomes too late to do so. The project manager is able to stay on top of the spending within the project and make adjustments quickly so that companies can either allocate more funding to problem areas or work to address necessary steps to reduce costs.
Types of Budget Tracking Solutions
There are several methods of budgeting tracking available. The option selected is often dependent on the company’s financial goal for the project.
Incremental budgeting: This type of budgeting adds increments to a budget based on the growth or decline of the company. This method typically is straightforward but sometimes overlooks the complexities of inflation and trends.
Activity-based budgeting: This method establishes a goal for the project and then works backward from it with a very specific, desired end result. It then outlines what needs to be done to help the company achieve the goal set. For goal-oriented budgeting over a short term, this method works well.
Value proposition budgeting: This form of budgeting focuses on the reasoning behind each budget amount and the value that each specific item creates in terms of stakeholders or customers. It helps teams to determine what items are valuable to the company and its objectives.
Zero-based budgeting: This method is a very common accounting method in which all teams or departments start at zero and then add in budget categories over time as they are justified. This option helps to minimize spending and often helps when there are dramatic budget reductions necessary.
Benefits of Budget Tracking Software
Once a company sets a financial goal, it can begin creating a budget using a software program. Depending on the software selected, it may be possible for the company to achieve a range of goals. This includes updating the budget amount in real time to reflect current expenses or changes to the project. The project manager may update expense reports at any time and view them for each project assigned within the software separately.
The use of budget tracking software or a budgeting app offers a number of benefits:
- It enables organizations insight into their actual expenses so that better financial oversight is possible.
- It may help organizations by saving money on unnecessary spending or spending that is not classified.
- The expense reports provide a clear breakdown of spending which can help to pinpoint specific areas of concern, including fraud.
- Companies can update their goals month to month or as often as needed based on changing needs.
- It is possible to better monitor costs to prevent companies or departments from going over.
- It also creates project reports that can help organizations to be more accurate and to spend more conservatively as needed.
Budget tracking requires careful establishment of the company’s goals. There is a need to involve the entire team to ensure everyone is on the same page. In addition to this, it’s important to refer back to the budget on a consistent basis to learn where the company is at in terms of meeting its financial goals at any time during the month. Companies must be consistent in using this type of software and linking it to accounting systems to ensure it is beneficial.