When you look at your budget, what do you see? A list of incomes and expenses? A snapshot of your business’s financial health? An account that gives you insight into your business drivers?
Ideally, you should be seeing all of those things. But there’s something else, too, that your budget can and should be: a commitment.
Now, that doesn’t mean it’s something written in stone. An effective budget should change and evolve throughout the year as your company has to meet new challenges, hire or let go of employees, or change direction in order to stay competitive.
What we mean by commitment is something a little different. A well-written, well-considered, and thoughtful budget is a tool that can help you to hold your employees accountable for the numbers they put in, as well as their performance against those numbers.
This, in turn, will help you create a strong budgeting culture at your organization. Here are a few reasons why.
Increasing employees’ involvement in the budget process will naturally increase their investment in it.
If employees see the budget as a document that simply gets handed down to them from the CFO’s office, they’ll most likely find it difficult to care about what it says. Yet this is how the budgeting process works at many companies – employees are kept at a remove from the budget, with little expectation or opportunity to contribute to what goes into it.
However, when you open up the budgeting process to more of your employees, you encourage them to take ownership of the process. In a way, budgeting can almost become a team-building exercise, as those who are involved will see how their input affects other departments and the business as a whole.
When you and your employees put time and thought into the budget, you increase accountability across the organization.
It’s easy to come up with a number and put it into a spreadsheet. But that’s not what you want in a budget – you want numbers that have been considered, and that are in that spreadsheet for a reason.
In order to get those numbers, you have to do two things:
- Give employees ample time and resources to make their contributions to the budget.
- Hold everyone (including yourself) accountable for those numbers once they’ve been finalized.
When employees know that their contributions matter, they’ll begin to see the budgeting process as more than just a routine chore. At the same time, when they know they’re accountable for the data they put in, they’ll take the time to make sure that data is solid.
Just remember that you have to be accountable, too – if you have to change your employees’ data, then you should, if possible, let them know. That way, your team members won’t feel that all the effort and time they put in to coming up with those numbers was wasted.
After a few budget cycles like this, you’ll be well on your way to a strong budgeting culture.
It takes time to build a strong budgeting culture at your organization, especially if you work on an annual budget model. If you’re using rolling forecasting, you’ll be able to affect change much more quickly.
Either way, you can’t go wrong by treating your budget as a commitment that you and all of your employees enter into. By doing so, you’re not only sending the message that your employees’ input matters – you’re also setting yourself up for much greater budgeting success.
Are you ready for a budgeting and forecasting solution that can help you achieve these goals? Learn more about how True Sky can help your organization here.