Budgeting: Employees Have a Lot to Offer

By Eugene McCord

With the budget season coming to a close, do you have a handle on what your financial expectations are for next year? More importantly, did your organization actively engage employees in building the budgets?

While some companies opt to contain the entire budgeting process to its finance department, I am a strong advocate of making the annual budget a part of each employee’s day-to-day operational metrics. Of course, the level of detail that is shared with employees is up to you. The point here is to make each employee aware of how they can influence the financial performance of the company. Here are a few ideas to get you started:

• It definitely takes time, but it’s time well spent to build a standard budget template that only allows for specific data input by month for the upcoming year. (The standard template makes the roll-up of all the input a whole lot easier than a bunch of emails.)
• Provide each department with their respective historical financial numbers and ask them to project forecasts for the upcoming year (providing them some high-level corporate assumptions).
• Take time to teach employees how to build budget assumptions. Share with them corporate financial objectives or company policy (i.e. top line revenue assumptions; how building leases and internal IT costs are budgeted; benefit load of added headcount; mileage rates; etc.)
• Insist that each department document their assumptions and how they are relevant to the numbers. This will be useful information in the future when departments review how the assumptions played out. 
• How often have we heard, “You can’t manage what you can’t measure?" If you can’t provide departmental financial statistics, it will be very difficult to hold departments accountable to their budgets. This does not mean that each department has to have full blown financial statements for each department. Some may just be simple cost centers or isolated areas of specific activities.
• Once all of the departmental templates are completed, combine these and review the cumulative numbers. From here you should be able to identify any gaps in assumptions.
• Budgets are also affected by many other influences that should be taken into account. Any known items that drive decisions in other departments should be included in the baseline assumptions when templates are distributed for input.

The key is to make the financial metrics something the employees can relate to and are empowered to change. Encourage them to challenge the historical numbers. They can’t change history, but they can certainly change how those numbers look going forward.

Eugene P. McCord is vice president of Software Solutions Operations at CHR Solutions . He manages customer-facing operations including activations, software support, business services, IT, quality assurance, and training.