Once the financial plan for your company is created, are you done with the budgeting process? Hopefully not.

There is a wide range of different practices when it comes the budgeting frequency among companies. It mostly depends on the size of the company, sector specifities and the level of uncertainty in the company or country dynamics, even the politics.

But how often should you run a budgeting cycle during the year?

Some companies do it once a year and some do it 12 times, each month. Actually, there is no right frequency to do it. It totally depends on your needs. If you are running a business in a very changing economical, political and social environment most probably you should do it at least 3 times a year.

Companies mostly decide this frequency by analyzing their actuals. First thing you need to analyze is the trend of your actual sales and spendings. If they fluctuate more than you think and above a certain percentage, it could mean that it is difficult to stabilize your incomes and spendings for a certain period. Then you need to create a new plan and/or edit the latest plan you build with the new realities and expectation of the current and following period.

When you create a financial plan, you create it with some assumptions. One of the assumptions may be your FX rate. Say you have assumed your FX rate over another one is 1,5. The forecast can change from 1,5 to 2 depending on your or the country’s macroeconomic situation. This is a change and a deviation from your assumption. You need to make another planning cycle.

Or it can relate to your competitors, your inflation, your number of headcounts or a new product.

In between, you may want to include a goal, remove a goal or modify a goal.

A workable and achievable financial plan needs to accommodate the changes and control the deviations. To accommodate the changes and control the deviations, doing periodical financial plan review is important. Periodical financial plan review only makes the financial plan workable and achievable. Financial plan review makes the plan up-to-date and keeps it relevant.

You need to periodically check if the financial plan is still on track or not, despite the changes in the circumstances. If it is not on the track, then how do you bring it back to the track?

Also sitting or just standing on the right track will not take you to the destination. On the right track, you need to run at the right speed to reach the destination at the right time. All these things need to be monitored frequently to check your progress. This monitoring becomes possible by doing periodical reviews on your financial plan.

Periodicity of Financial Plan Review:

The next logical question is how frequently we need to do the financial planning review. Generally, in every 6 months we need to do a review. If the situation demands, then we can go up to 4 reviews in a year, depending on the number of the planning cycles.

Tolga Aybars
Co-Founder
Planard