Mastering the Budget Process
A few random topics the author couldn't figure out how to squeeze into previous chapters:
Negotiation
Getting a budget approved requires negotiation, and it often requires appealing to managers on higher levels (grand boss, great-grand boss, or even higher) that you seldom see, and may not have direct lines of communication with them.
Also, at higher levels of management, the view is broader and details lose definition, so rather than the minutia, focus on what a plan does for the company: how it adds value, contributes to the mission, addresses larger issues, etc.
Estimation Skills
Developing the ability to create accurate estimates is essential to building reliable budgets, and that's a skill that's built over time. The author provides some random tips:
- Keep a record of your budgets and their performance (actual versus estimated) to identify areas where your accuracy needs improvement
- Consider whether you are organizing items appropriately, especially where there are large numbers that could be split into components
- Seek help from others - knowledge-sharing among practitioners can be more educational than theoretical approaches
- De-personalize mistakes - seek to correct process and improve decisions rather than merely blaming people
Timing
Managers see "budgeting time" as stressful, with a lot that needs to be done to meet a tight deadline. The author sees this as procrastination - if you wait until you're told to budget, you're under the gun.
He suggests that budgeting for next year should start as soon as this year's budget has been approved. Duplicate the budget and adjust it for the differences you can already foresee.
Periodically, you will update your working budget to reconcile actual against budgeted expenses. As a follow-on step, pull up next year's budget and consider making adjustments.
Rolling Budgets
Another technique the author suggests is creating a rolling budget. This can be a 15-month budget (covering five quarters) or a 13-month budget (13 individual months). When one unit (month or quarter) passes, drop it from the budget and add another unit on the end.
The advantage to this technique is you always have a working budget for the coming year, so when it comes time to do "formal" budgeting, you'll already have a basic budget, though that may be an opportunity to take the time to review it thoroughly - but at that point, you've got a document to begin working from rather than having to start from nothing.