1. Start in September
Budget planning is a long process that involves strategic and tactical goals as well as budget calculations - leave yourself enough time to work through all of it with your management team and get your company on solid footing heading into the new year. The time to start is right now.
2. Business Goals THEN Budget
The first step to budget planning has nothing to do with spreadsheets and dollars. You need to start with a basic question: What do you want to accomplish as a company next year? This is the time to set your goals because they will drive everything else in this process. September should be the time you have a senior management offsite session to discuss this. It is important it be offsite and away from the day to day. If you are a large company that may mean carving out a couple of days at a hotel or conference center; if you are an individual owner it may mean sitting on your porch with a notebook. The important thing is to get out of your regular work environment and do some big picture thinking.
Your job in this session is establishing your corporate goals for the coming year. This will drive the remaining departments as they plan their goals and subsequently the budgets with the resources to support those goals.
Corporate <--> Department <--> Managers <--> Employees
Notice those arrow point both ways...goals at all levels need to feed into each other and ultimately support corporate goals.
3. Involve the Whole Team
Senior management members sometimes like to think they know everything, or maybe think they are supposed to know everything. Well I am sorry to be the one to break it to you, but you don't - and that's OK. Line managers and front line employees can identify impacts on business processes and systems better than you can because they work in the details every day. Use their knowledge and input in your budget planning process - it makes for a better budget, and a culture where everyone feels valued and aligned with the company's goals.
4. List Your Projects
One of the best things we did as a senior management team was move to a project based budget. For organizations with multiple inter-related departments, listing out all the projects you are planning on for the coming year gets everyone on the same page. For smaller companies, it's good to list out your projects to make sure your budgets support your strategic and tactical plans.
5. Align Department Budgets
Have every department review every project, even if they think it doesn't impact them. Challenge them to think it through: If there's a new HR software planned for next year, will that require more storage or bandwidth that IT needs to plan for? If there's a new client project that requires an onsite project manager, do you need to budget for relocation of an existing employee or engage a placement agency to find a new hire in that city? Thinking through the logistics of the projects puts you in a better position to document the costs, and have a more accurate budget.
For corporate projects that impact multiple departments, be sure you don't have duplicate charges because both departments accounted for it, or have missed something because you thought another department was budgeting for that - assume nothing. Every department head should look at all individual department specific items as well - you may find efficiencies by combining efforts or one initiative may eliminate the need for another. Use this time to plan and do some cross referencing to save yourself time and money.
6. Get It Done By Thanksgiving
The major work for budget planning should be done before Thanksgiving break. Not only will you start to lose people to holiday vacations, you also need to prioritize your efforts and take action at the end of 2013 to get ready for 2014. Do you have new hires scheduled for January to support a new project? You need to start interviewing for those jobs in late November/early December to have someone in place.
Debbie Millin is President of UpperLevel Solutions - a Boston-based firm offering part-time and interim Chief Operating Officer services, operational assessments as a health check or as part of due diligence, and executive project leadership.