How to ensure a future-proof budget

From hard KPIs to scenario thinking

When developing a budget, you usually make decisions based on “past performance” and “hard KPIs.” This often fails to adequately consider future changes, which can quickly lead to problems. At Copernicos, we therefore believe that this era demands a new, integrated, and dynamic approach to decision-making, and therefore also to budgeting: scenario thinking. What does this entail and what benefits it brings to your organization? We explain the benefits below.

1. You work together more efficiently

Many companies create a budget template and share it with the various departments. Managers then add their input. This creates a lack of consistency, as you don’t know what the managers based their figures on. This results in a budget that’s opaque. Moreover, the principles and assumptions behind the figures aren’t clear to everyone.

In a system dynamics model, all departments work together within the same model and use the same principles and assumptions. This results in greater consensus within the organization. Employees also understand the budgets better, and there’s more cohesion. This allows for faster and more efficient collaboration, especially during changes.

2. You know in advance whether your budget is future-proof

You naturally want to know if your budget will hold up in the future. Scenario analyses based on a system dynamics model provide insight into the impact of future changes on the budget. For example, you can see what happens if your workforce shrinks or if energy prices continue to rise. This way, you can test whether your budget can withstand changing scenarios. This way, you know in advance what your organization can expect, instead of having to panic in the moment.

3. You make decisions faster and more smoothly when changes occur

To increase the impact of your budget, cohesion between the departments involved is essential. With a system dynamics model, you bring the worlds of these departments together into a single model. You incorporate everyone’s assumptions and principles and share them with the other stakeholders. This creates cohesion. As a result, all departments understand the budget’s structure and distribution, and its significance.

If circumstances change, decision-making will proceed much more smoothly because the stakeholders know the basis of the original budget. This shared understanding allows you to make decisions more quickly regarding changes.

4. You empower stakeholders to be more flexible and decisive 

By creating a shared budget, you train the mindset of those involved. Based on the model and scenario analyses, you demonstrate that things could be different in the future. For example, you clarify that energy prices are likely to rise. This will require budget adjustments throughout the year. This approach ensures that stakeholders are more flexible and decisive when those changes actually occur.

5. You immediately see the weak spots in your budget

Budgets are important management tools for organizations. Scenario analyses with a system dynamics model allow you to determine budgets differently. This allows you to easily identify the weaknesses in current budgets. The analysis reveals potential errors, double counting, and poorly substantiated components. This allows you to improve both the budget and the budgeting process.

Want to get started with a future-proof budget yourself?

With our system dynamics models, we outline scenarios for your company and teach you how to implement them in your operations. This ensures:

Your budgets are more resilient to change

The budgets are better understood by relevant managers

You respond more quickly to changes

You can reuse the system dynamics model for your budgeting every year. It provides a solid starting point and ensures consistency. Looking for a dynamic and visionary alternative to create a future-proof budget? Contact us to discuss the possibilities.