How do you balance the trade-offs between budget benchmarking and customization?

1 What is budget benchmarking?

Budget benchmarking is the process of comparing your budget with other similar entities, such as competitors, peers, or industry standards. The purpose of budget benchmarking is to identify gaps, strengths, weaknesses, and opportunities for improvement in your budgeting process and outcomes. Budget benchmarking can help you set realistic and achievable goals, evaluate your performance, and learn from best practices.

4 What are the trade-offs?

However, budget benchmarking and customization also involve some trade-offs that you need to balance carefully. For example, budget benchmarking can be time-consuming, costly, and complex, especially if you have to collect and analyze data from multiple sources and formats. It can also create unrealistic expectations or pressure to conform to external standards that may not suit your situation. On the other hand, budget customization can be challenging, risky, and subjective, especially if you have to make assumptions, judgments, and adjustments that may not be supported by evidence or agreed by stakeholders. It can also create inconsistency or confusion if you deviate too much from established norms or guidelines.

5 How to balance them?

To find the optimal balance between budget benchmarking and customization, you need to adopt a strategic and pragmatic approach that takes into account the benefits and costs of each option. Begin by defining your purpose and scope - this will help you focus on the most relevant aspects of each option and avoid irrelevant details. Choose reliable benchmarks and criteria that match your purpose and scope, and understand the context and assumptions behind each benchmark. When customizing your budget, justify and document your choices transparently, seeking feedback from stakeholders. Finally, review and revise your budget regularly, monitoring its performance against benchmarks and goals to identify any gaps or opportunities for improvement.

6 Here’s what else to consider

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