Budgetingby John Kind
Present, revise, agree and communicate
Be prepared to present your initial budget to your senior colleagues, both in writing and verbally. When you do so, ensure that
- The assumptions under which the budget submission has been prepared are very clear – you have assumed, for example, that additional ‘hot desking’ will be introduced from 1 July next year and that you can save £3,000 on health care costs; if you don’t spell out your budget assumptions you will find it extremely difficult to argue for and defend your budget proposals
- The risks attached to achieving the budget are identified (for example, the risk that additional ‘hot desking’ will not be introduced by 1 July and that you will not be able to save the £3,000 from your health care cost budget); you need to demonstrate, of course, that you will take every practical step to avoid or minimise the financial impact of these risks
- The KPIs (Key Performance Indicators) for your team are highlighted (for example, salary costs for each member of your team and the average time taken to complete major systems development projects).
When you’re preparing a budget, be very clear about all the assumptions on which it is based, such as staff numbers, salary increases and the expected launch dates for new products and services.
Highlight the risks attached to your budget, such as project delays and recruitment problems.
Indicate the steps you will take to reduce the impact of the risks if they occur.
Your initial budget submission is likely to be challenged during a series of budget meetings. This means that you may have to
- Reconsider all or some of your proposals (for example, introducing additional ‘hot desking’ earlier, say, from 1 April rather than 1 July)
- Re-work their financial impact, so that your revised proposals show lower budgeted costs than you had originally presented.
These budget ‘challenge’ sessions simply mean that budgeting is an iterative process. You may have to prepare and present a number of budget proposals until, finally, your budget is accepted. It’s all part of the process. And don’t lose heart! Your budget submission will be approved, finally, even if it takes rather longer than you expected.
Agree and then communicate
Your task is now straightforward! Make sure that your budget proposals are agreed and formally approved or ‘signed off’.
Finally, communicate. Make sure that everyone in your team knows what is expected of them so that, individually and collectively, there is a clear understanding about what they have to do to contribute to the achievement of your budget objectives.