Build an Annual Budget in 3 Days
In the last blog, we talked about the Lost Art of Execution. This week, we will focus on another key component to executing on a good strategy: The Budget.
The problem is, most company's budgeting process is extremely laborious and time-consuming. Only to put together an overly complex spreadsheet that will need constant updating anyhow. So, how can you build a budget in just a few days? Simple: set goals and then spend the majority of your planning time building your operating plan.
Hot Take: Your budget is only as believable as your operating plan
Goals have to come first. If your leaders and department heads don't know what the expectation is, it will be virtually impossible to have an aligned operating plan that delivers on a believable budget. Make sure senior leadership and all stakeholders are aligned to budget goals and expectations first. This can be achieved in one meeting.
Next, task the accountable parties with building their operating plans to achieve those goals. This is best done through a good strategic planning process. From a robust and believable operating plan, the budget will flow. Elements of a good operating plan that inform a budget are:
Well researched and believable cost estimates on a timeline - New staffing? Commission structures or bonuses? Purchases or investments that need to be made?
Clear planned out strategies, projects and activities that will drive revenue and by how much on a timeline - IE: a large promo in January will increase revenue 12% year-over-year in February.
All elements of good execution will be included: People, Ops, Strategy
The Budget - Day 1
Accountable parties present their operating plan to the budget group --- This should drive robust and meaningful conversations around resources, believability and improvements to the operating plan
Day 1 goal: Finalized operating plan
The Budget - Day 2
Finance team presents budget to budget group -- Highlight areas where operating plan may need to change to address gaps or needs in the budget
Day 2 goal: Alignment to budget and changes to the operating plan
The Budget - Day 3
Accountable parties and Finance walk through final changes to operating plan -- This is the final check. Does the operating plan believably align to the budget?
Day 3 goal: Finalized operating plan & budget
The point is: Spending weeks or months noodling on a spreadsheet of projected results does not make your business perform. Spend that time diligently aligning your organization to a kick-ass operating plan for the year that makes the spreadsheet an easily compiled output of that plan. Then constantly review budget results against it and iterate the goals and plan as needed.