This is a sad state of our political affairs, but it teaches a lesson on budgeting. In business, a company, cannot go without a budget in a formal process and plan, and they definitely cannot just piecemeal their budgetary needs if they want to succeed long term or even short term. Thus companies go through a similar budgeting process as Congress but they have to come up with a consensus and tough decisions have to be made. In a recent review with a client, I sat through budget process meeting. For three months each department put together their wish lists and what they needed and why. They talked about how their department contributed and/or took from the bottom line and why they felt this expenditure was needed and how it would help the department and thus the company. The one department, that did not come prepared, and just stated their income targets, with no basis, was the department that got me thinking of this article. The department in question was the sales department. In order to plan for everything else, sales numbers had to be accurate and through, they were neither and there had been no communication among other departments about what they were thinking. The Vice President of Sales came in and said we will grow by 10% over last year. This is a great goal, but how were they going to do it? Last year was their best year ever, and they had thirty huge orders that would probably not be easily repeated due to the cycle of sales this company experiences and the economy, those deals had been in the works for over 18 months and all hit in one year, and yet they were going to grow, while marketing was shrinking their budget as they were not seeing lift on certain areas.
Thus the company might be headed for trouble. Their revenue source had no idea, and the part of the company that brands and gets their name out was cutting back as they did not see the market supporting their efforts over the next year. This affected other departments and the budget was in disarray. This is what companies deal with every year and we see a bad example of it in Congress each year as well.
Through extensive meetings and budget planning processes, Solve Ur Puzzles, has come up with an efficient budget process to help streamline these issues and identify needs and wants and plan for the future.
· Identify income sources and projections
o Know where the revenue is coming from and how easily is it repeatable
o What growth Goals are needed for coverage of cost increases, etc...
· Know what your supply chain will do
o Will they raise rates next year
o Is there an expected shortage of product (i.e. going into 2014, due to legal changes eggs production was going to decrease? If you needed eggs your price per egg was going to increase thus your costs would skyrocket.)
o Are there new competitors willing to offer deals, or are you losing vendors
· Identify major expenditures
o DO you need a machine
o Do you need a new building
o What people resources do you need
· Look at labor costs and benefits
o What changes are happening
o What new laws will increase or decrease your burden
· Share a preliminary budget with all departments, get input and feedback
· Identify five year plans and wants and needs
· Check the previous 5 year plan
· Have a joint meeting to discuss everything and come to a consensus.
These simple steps will help alleviate confusion and help plan out the budget in a simpler way and fashion. How do you run your budget meetings?