Managing a departmental budget is often a skill that goes untaught. If you’ve recently been promoted into a managerial position then you may have the people skills and industry knowledge to excel in the role – but perhaps not the budget know how. A corporate budget is similar to a personal budget except that there are different stakeholders involved. There are some simple ways to approach the process to ensure that you get it right.
Review the existing budget
For most managers there will already be a budget to work from and refer back to. This is a good starting point, as it will reveal how spend has been allocated in the past and what elements you may have to include in your own calculations. Even if you choose to take a slightly different approach further down the line, using an existing budget as a benchmark is a smart place to start.
Get a good understanding of how resources are used
Managing a budget will often take you outside your own area of expertise and experience and into allocating finances for teams that you may have little or no experience of. It’s essential to communicate with key people whose work is covered by your budget to ensure you understand how resources are allocated. For example, there may be software or hardware that you’re not aware of that needs to be part of the calculations, equipment maintenance costs to include and the potential to make changes to the way existing spend is managed to make savings.
Make sure you understand corporate expectations
While individual departments are responsible for their budgets it’s usually at the corporate level where increases and decreases are determined. That’s why it’s crucial to understand corporate expectations as far in advance as possible. For example, it may be that the message is that budgets this year need to be within 7% of what they were last year. The earlier you have this information, the easier it will be to accommodate it.
Identify operational and discretionary items
If there comes a point where the budget needs to be reduced the simplest way to do this will be via operational items (paid monthly with no long-term contract) or discretionary items (expense allocations for a certain activity or project). This will give you some flexibility if budgets need to be adjusted because corporate targets have not been met.
Be resourceful – but ask for help if required
There are lots of different ways to ensure that your budget works, from finding interns to cover certain roles to switching to a better value supplier. It’s key to ensure that you know who to turn to if you need help with the budget or if there is a particular budget related expense that you need to evaluate This is often the finance team – and, if not, they are usually well positioned to help you find someone else who can provide support.
Managing budgets may be a new experience but it’s a skill that can be quickly acquired with the right direction.
Find out more by booking your place on our Managing Budgets course