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3 Steps to a Simpler Budget Cycle

You dread August. It is not because of the hot and humid weather, and not because your children have been out of school for too long and are climbing the walls. No, it is because August means budget season.

This year, however, you don't need to approach budget planning with trepidation. By applying the following three simple rules, you will be able to simplify your budget cycle and make it more meaningful.

Rule 1: Pick a goal. Stick to it. Begin by choosing a reasonable and realistic goal (or goals). Once you have identified a goal, stick to it — throughout the entire planning process. For example, if you determine your goal is to grow sales, you should measure every item in your budget in terms of how it works towards achieving that goal. Don't try and finagle items into the budget that do not touch on your goal. Non-essential items are distracting and will work against your efforts.

Note that you will likely have several goals, for example, growing sales and product development. Work through the budget, as described above, for each goal. The result will be a targeted, effective, and operational budget.

Rule 2: Don't act in a vacuum. A common trap in the budget process is becoming Fort Knox. That is, there is a habit of developing the budget in a vacuum and then dumping it down the line. Work on the budget with your team. The more input you get, the more realistic the budget will be. Better still, by including your team in the process, they will have higher levels of buy-in and will be more motivated to implement it.

Rule 3: Question your own assumptions. Throughout the process it is important to stop along the way and question your own assumptions before someone else does… someone like your boss. Your budget should be built on solid ground. You need to be able to show that you can justify every item in the budget based on facts, knowledge, and team input.

It is August, but it's possible to take the stress out of the season with careful planning and excellent communication.

7 comments on “3 Steps to a Simpler Budget Cycle

  1. FLYINGSCOT
    August 2, 2013

    The problem I have seen in many high tech companies is that too few people get involved in budget planning and the numbers simply are declared and rolled out with little real world input except from the finance guys.  This makes any step change difficult.  

  2. _hm
    August 2, 2013

    Important part of groth is vision for future. Budget must involve good part for vision and future growth. One needs to be imaginative and take calculated risk.

     

  3. Hailey Lynne McKeefry
    August 2, 2013

    @Flyingscott, i've seen the same thing in tech businesses. At least in part, it can be blamed on too much to do and not enough hours in the day. On the other hand, the cost of not getting everyone involved is huge. Too often, it's the people in the trenches that have the best data.

  4. Eldredge
    August 4, 2013

    WHether the topic is budget related goals, quality improvement, or vision for the future, it is really important to get input and buy-in from as much of your employee bae as possible.

  5. jbond
    August 5, 2013

    You are correct, too many companies don't let everyone get involved or take everyone's information into account and they end up severely over budget.

  6. ahdand
    August 6, 2013

    @jbond: True in a way you cannot have everyone involved in the decision making process but atleast they should consider the opinions of those and then come into a conclusion.

  7. jbond
    August 13, 2013

    I agree completely!

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