The budget that accepts everything: spreadsheets adjust revenues and costs until consensus
According to Your Money, revenue is usually lower than desired and costs are higher, and the plan is renegotiated until it becomes an acceptable result.
BY THE X-TRADER NEWS NEWSROOM · REPORTING FROM SEU DINHEIRO · 2 MIN
A budget exists to tell how far a company can go. According to Seu Dinheiro, in practice it is usually molded until it fits into the number that the board considers acceptable.
According to the report, the preparation of the corporate budget begins in the last months of the year, before the next fiscal year even begins. During this period, executives meet, spreadsheets are circulated between areas and projections are reviewed until a consensus on revenue and expenses emerges.
The text highlights two recurring problems. The first is that revenue tends to be lower than desired. The second is that costs are generally higher than expected. When both things happen at the same time, the plan needs adjustments to close the account.
The usual practices cited by the publication are to increase commercial goals, reduce expenses and repeat rounds of negotiation until the result is considered acceptable. The problem, according to the text, is the sequence: the final number depends more on internal discussion than on the actual capacity of the operation.
The author cited in the report states that the spreadsheet can increase sales without the emergence of new customers and reduce costs without any contract being renegotiated. In other words, the budget changes on paper, but not necessarily in operation.
For an editorial line that defends fiscal responsibility and spending discipline, the conclusion is straightforward. A budget that accepts any number fails to fulfill its function of limiting expenses and serving as a reference for demanding results.
What changes for the investor
For those who follow balance sheets, the point of attention is the quality of the projections. When sales targets are raised without support from new customers, and when cost cuts are not accompanied by contract renegotiation, the risk of frustrated results increases, which can appear in companies' quarterly numbers. It is worth comparing the published projections with the history of compliance and checking whether the announced savings have concrete support. This reading does not indicate buying or selling stocks or predicting price movements, but it helps separate a plan with a real basis from a plan that only works out on paper.
Automatically translated from Portuguese.
