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Budgeting Tips for Managers

 

Unless you're part of a financial department, you may have received little or no formal training in how to develop a budget forecast, track expenses or make midyear adjustments. You've been handed a spreadsheet or finance report, and you're expected to know what to do with it.

There's no better time to ask stupid questions than when you are brand new to something and have never done it. It's better to ask and spend time upfront learning than to wait until someone points out your mistakes. Ask your manager or predecessor to review the underlying philosophy, the overarching goals, the format and each line item. Being trained to do things according to their specifications upfront means fewer headaches later.

Here are some tips to help:

  • Take a finance and budgeting for nonfinancial managers course. Check with a local university or community college to see what their offerings are. Take time to review your company's annual report and to understand various financial ratios.
  • Manage your department budget as if it were your own. We tend to treat the company's money as if it grew on trees. It doesn't, and it's now your job as a manager to take personal ownership of your department's resources.
  • Be a team player. Talk to your manager about his or her overall budget. Your unit is part of a larger entity — see where your budget fits in and how it supports the big picture and the interdependencies with your peers.
  • Watch out for pitfalls. Some companies make the foolish mistake of implementing use-it-or-lose-it spending — when you get close to year-end and your budget is running under forecast, the worry is that if you underspend, next year's budget will be based on this year's actual. Talk with your manager about how to handle this if it happens where you work.
  • Track your expenses monthly and make proactive corrections. You can ask for monthly reports or keep track of your budget spending yourself. Don't wait until the end of the year and surprise yourself and your boss. Be accountable, measure yourself and proactively report to your manager.
  • Build in flexibility. Because unforeseen things happen that can derail your budget, build in some discretionary spending. Order items only when you need them — and try to avoid binding contracts. If cash flow gets tight, you can defer costs or cancel the project outright.
  • Be transparent and involve your team. Get them involved in setting up the forecast, which helps them understand the budgeting process. This creates a sense of shared ownership and encourages them to find creative ways to manage expenses.
  • Be strategic. Start developing a strategy and goals. Determine the resources required and whether you need more than last year, then prepare a business case to justify your request for additional funding.

Realistic budget goals make a difference. Make a list of areas where you can expect to improve and figure out how to achieve them. If you find significant savings in your business finances, add the extra money to your marketing budget to make it count.

Managing a budget is an important role for a manager, but never lose sight of the most important assets — your people. Spend at least five times as much time developing your team as you do crunching numbers.

 
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Siegel Solutions Inc
Siegel Solutions Inc
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Our firm provides the information in this e-newsletter for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. Tax articles in this e-newsletter are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided "as is," with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.
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