Quick: Are you confident in the accuracy of the budgets other departments submit? Didn’t think so. You’ll have a different answer after employing these three strategies.
Autumn’s here: Temperatures are falling, the leaves are changing, and companies are hard at work on their budgets for the coming year.
If you’d rather rake an acre of leaves with a plastic fork than pour over other departments’ attempt at a future spending plan, you’re not alone.
But you can have more confidence that the estimates you’re being given are fairly reliable.
To get there, try these three strategies:
Strategy 1: Consider the source
These days more companies are putting budget prep in the hands of the departments that are going to use them. Smart move — it’s a surefire way to boost accountability.
But as those numbers start to come in, take a step back and consider the manager in charge of preparing it.
Granted, budgeting’s a tough skill. The only good way to get better at it is practice.
So if you have a new manager driving the train in a given department, you’ll be sure to offer a lot of extra hand-holding.
For those who’ve been there, done that before, try this:
Take a look at the budgets those specific folks have submitted in the past and revisit by how much they were off. Should give you an idea of who’s reliable and who might require some tough follow-up questions.
Strategy 2: Push for a backup
Among those follow-ups to ask: What kind of backup plans do you have?
So a department is basing its budgets on prices from a particular supplier, with specific financing, terms, etc.
But if the past month of economic chaos has shown anything, it’s that no business is 100% safe.
Find out if your managers have factored in what would happen if your company had to buy from a different vendor, or you no longer received that 2% discount.
Failing to have a Plan B (and estimating the costs of it) can leave your company with a nasty — and expensive — surprise down the road.
Strategy 3: Standardize the “fudge factor”
Of course, there’s one thing your managers probably did not forget to do: Pad the numbers they were sending you.
No one wants to come in over budget, especially if your company charges them back. So they inflate their estimates a bit.
Just how much are they doing it by?
You certainly don’t want to sanction this practice. But you do want to encourage some consistency.
If departments are going to include a “buffer,” ask them to do so once they’ve arrived at a final number.
Otherwise, if numbers are being padded at various steps in the process, the number you ultimately receive may be so skewed it’s useless to you.