5 Resolutions To Start the New Business Year Off Right
It’s an ideal time to get everyone on the same page and transform your budget into a strategic tool that helps your team achieve more.
We’ve found that many businesses simply accept the budget process as being cumbersome and complex, but it doesn’t have to be that way. As you turn the page on the calendar year, it’s an ideal time to introduce some new perspectives and methods to get everyone on the same page and transform your budget into a dynamic, strategic tool. Here are five resolutions to start fresh.
Resolution 1: Make the Shift to Rolling Budgets
Business needs change rapidly, but most budgets don’t. A recent survey we did with business owners and finance managers showed that more than half set budgets just once a year. Less than 15% of the companies we talked to evaluate their budget periodically throughout the year and adjust as necessary, and businesses with more than 500 employees were even less likely to operate this way.
Moving away from static spreadsheets to more automated tools certainly helps, but there’s no need to wait for a technology-driven solution. Simply increasing the cadence of cross-functional budget check-ins and changes will help you make this important and impactful shift.
If you’ve been thinking about your budget annually, put quarterly or monthly check-ins on the calendar right now. And if you’re already doing that, try increasing the frequency to weekly or even daily to help your organization transition to a rolling, “live” budget mindset.
Resolution 2: Break Down the Silos
Our survey results showed that of the companies who never go over their budget, about three-quarters (73%) report that they have ongoing communication and budget updates across departments. We found this strong cross-departmental communication to be the top driver for budgeting success. Too often, budgeting and reporting is done department by department, without a shared understanding of how each department’s budget and priorities connect to the overall business strategy.
When you put those regular budget check-ins on the calendar, be sure to make them cross-team events. Set the “we’re in this together” tone by giving updates on your business priorities (highlighting any changes each time you meet), and then allowing time for discussion of how each department’s line items support that strategy.
By devoting sufficient time to the big picture, with frequent reminders that everyone is working together toward the same goals, you can help your teams be more open to trade-offs and discussion about the best way to invest company funds. You’ll also increase visibility into each department’s priorities and challenges.
“Ongoing communication and iteration with budget owners and spenders helps teams stay aligned with overall strategy and empowers everyone involved.”
Jeff Drummond, VP of Finance and Accounting, Center
Resolution 3: Demystify the Data
Most budgets are written in financial terms that are well understood by FP&A teams, but aren’t always easily digestible by other departments. This can perpetuate the mindset that finance “owns” the budget and can make team members feel less invested in it.
Remember that people absorb information in different ways, so look for ways to get beyond spreadsheets and charts. Look for creative ways to present data visually and pull out the story behind it in real, relatable terms.
Challenge team members to title each chart with a headline summarizing the story behind the data. Make it a practice to explain commonly used acronyms to build shared understanding, and allow time for questions and discussions. Building a shared understanding will help your whole team feel more invested in the process—and more accountable for the outcome.
Resolution 4: Empower Your Finance Team as a Strategic Business Partner
Your finance team can be an essential resource for helping the entire organization use the budget as a strategic business tool. The trick is to set the expectation that finance doesn’t “own” the budget—everybody owns the budget.
Set the right tone by creating regular opportunities for cross-department collaboration, and empowering your finance team to partner with each department to develop a budget that supports the overall business strategy.
Finance can drive the progress and be the expert on the overall strategy, but it’s essential that each department feels invested in the process as well as the outcome. And the more the finance team knows about what each department is trying to achieve, the more effective the partnership will be. This takes active collaboration and discussion beyond just circulating spreadsheets.
“We believe that the budget should more than a dreaded annual event: it should be an ongoing opportunity to reflect on what’s happened and plan for what comes next.”
Heather Singh, Chief Marketing Officer, Center
Resolution 5: Get a Handle on Discretionary Spend
Office supplies. Subscriptions. Trade shows. Travel. These types of one-off expenses may not be the largest line items in your budget, but together they can have a surprisingly big impact on your bottom line. Discretionary spend is the easiest area for companies to control, yet 25% of the business owners and managers we polled had “no idea” how much of their budget goes toward it.
If you don’t have a baseline figure for discretionary spend, now is an ideal time to establish one. Simply add up everything from 2017 that’s not a fixed cost and calculate the percentage of your total expenses. If you’re above 20%, this is likely a strategic area to focus on for your bottom line.
When you review your discretionary spend from the previous year, you might identify some areas where more formalized policies would make a difference. Be sure to involve your team in the discussion, and communicate any new policies clearly. The more people understand the why behind your policies, the more successful they will be.
TO THE POINT:
It’s easy to simply accept the budget process as cumbersome and complex, but some simple organizational and practical changes can help you transform it into a strategic tool that helps your team achieve more.