In business, establishing annual budgets for sales and input costs is a fundamental practice. Organizations invest significant time and effort into this process, ensuring thorough review and validation so operations align with financial objectives. Monthly tracking identifies variances that trigger necessary corrective actions to achieve agreed-upon financial targets.

Yet, one of the most critical operational input costs, energy, rarely undergoes this same rigorous budgeting and tracking process. When energy budgeting exists at all, most organizations simply take the previous year's costs, apply a flat percentage increase, and insert this figure into a spreadsheet.

While this approach might have sufficed decades ago when companies had minimal control over utility costs, this simplistic thinking today represents a significant liability.

Monthly energy costs comprise two key components: energy usage and energy pricing.

Usage fluctuates with production levels, weather conditions, labour hours and other monthly variables. When companies establish energy key performance indicators such as kilowatt-hours/ton, they begin to understand how production directly impacts consumption patterns.

Meanwhile, energy pricing consists of commodity costs, transportation/transmission fees and distribution expenses. While energy markets can exhibit volatility, with proper knowledge and information, this volatility becomes predictable.

The stakes have risen considerably. Carbon reporting is increasingly becoming mandatory. Utility costs now constitute a much larger portion of operational expenses. A static budget built on historical figures doesn't merely risk inaccuracy, it guarantees a lack of accountability, hinders necessary action and ultimately leads to missed opportunities.

Simultaneously, finance and operations teams face mounting pressure to explain monthly cost variances, validate ESG metrics and plan for future energy requirements. Unfortunately, they often attempt these crucial tasks with inadequate information, cumbersome spreadsheets, educated guesswork and outdated reports, This formula is suboptimal to manage energy and the associated carbon related to energy. 

What can businesses do?

To avoid being caught off-guard or misallocating operating or capital, businesses must evolve their approach to energy budgeting and planning by incorporating robust management processes. This requires:

• Accountants playing a critical role. Accountants should be proactive in driving an internal process.
  • In order for operations to understand their energy usage and what can be done to control it.
  • In order for procurement/finance to be able to understand and explain future energy pricing and options to control it.
    • Those two items are required and should be used to develop an annual energy budget that is made up of monthly intervals. This information should be reviewed and approved by senior management, and reported variance should be identified each month. Accountants are deemed as trusted internal advisors and measure the effectiveness of the operation. By doing this, energy will be seen as a major component for the organization. 
• Capturing and tracking detailed monthly energy metrics at each site level rather than just recording total expenditures and taxes. At minimum, businesses should monitor energy usage, pricing components and key drivers of consumption such as production volume.
• Reporting and establishing energy as a distinct line item on monthly operating statements. Consolidating energy costs into generic corporate line items like "sundries" effectively declares that energy is neither worthy nor important enough to manage strategically.
• Facilitating collaboration between procurement, finance, and operations teams, as energy impacts all three functions. Any element affecting your P&L (profit and loss) statement should be managed proactively and continuously.

Implementing these changes doesn't require a massive internal overhaul. However, it does necessitate access to data that is timely, accurate and actionable, along with the capability to transform this data into meaningful business decisions.

The Fix: Real-time data, predictive forecasting, transparent reporting

Solving the energy budgeting gap doesn’t require reinventing internal processes, but it does require better tools. Today, emerging platforms can automatically pull data directly from utility invoices, organizing usage, cost components and emissions into a structured, dynamic system.

Instead of relying on static spreadsheets or generic estimates, finance and operations teams can now build monthly or annual budgets tied to actual performance data.

The best systems go a step further, offering forecasting models that factor in production volumes, commodity rates, seasonal variation and emissions profiles. When actual results arrive, variance reports flag precisely where and why figures differ, whether from unexpected spikes in consumption, tariff changes or billing errors.

These tools can also directly support Scope 1, 2 and 3 emissions reporting by linking actual energy use to greenhouse gas outputs, replacing assumptions with verifiable data.

Software won’t replace sound management, but it enables the kind of proactive, data-driven decision-making that energy budgeting demands today.

Estimating is no longer enough. Planning with precision is possible, and essential.