In the context of Lean Budgeting, guardrails are pre-determined spending thresholds or limits that are put in place to guide and constrain the use of resources. These guardrails serve as guidelines for teams and individuals to ensure that spending remains within acceptable boundaries and aligns with organizational goals.
Guardrails can be used to set limits on spending in various areas, such as capital expenditures, hiring, travel, and training. For example, a guardrail might be set to limit travel expenses to a certain percentage of the budget, or to cap the amount of money that can be spent on hiring new employees.
Guardrails are useful in Lean Budgeting because they help teams stay focused on high-priority initiatives while also preventing excessive spending or waste. By setting clear guardrails, organizations can ensure that their resources are being used in the most effective and efficient way possible, which ultimately helps them achieve their strategic goals.
