Budgeting is one of the key business skills, and even non-financial professionals can benefit from being able to recognise the characteristics of an effective budget and understand the advantages and disadvantages of different types of budgeting.
Planning and controlling a budget for the first time as a non-financial manager can feel a bit intimidating, though, especially because new managers are often expected to jump straight into developing a budget and tracking expenses without receiving much formal training.
So if you’re a new manager looking for guidance on how to develop a budget and control your company’s financial resources, here are a few tips for getting started.
1. Familiarise yourself with the basics
The first thing you should do when taking on a role with budgeting responsibilities is to familiarise yourself with some of the basics, including the characteristics of an effective budget, the different types of budgeting such as historical and zero base budgeting, and budgetary variance.
If you weren’t given much training before starting your new role and are completely new to financial management, it can also be a good idea to invest in some formal learning. These days there are plenty of affordable online courses for non-financial managers that can help you understand how to set financial goals, forecast revenue, and monitor performance against goals.
2. Understand your organization’s goals
In addition to developing practical budgeting skills, it’s also important to focus on your strategic plan and business goals. Without a clear understanding of what you are working towards, it will be difficult to ensure that organisational resources are being managed as efficiently as possible.
The clearer and more specific the goals, the easier it will be to budget for them. For example, if one of the company’s goals is to increase sales, you’ll likely want to allocate a larger share of the budget to marketing activities. Or if the company would like to revamp its website, funds will need to be put aside to hire a designer and web master.
3. Work together as a team
Because you need to understand your organisation’s strategic plan and goals in order to manage organisational resources efficiently, it’s important to keep open lines of communication with everyone on your team. So don’t be afraid to ask questions and get input and feedback, especially when you’re first starting out and still getting to know the company brand and ethics.
Making sure everyone is on the same page and understands why certain financial decisions are being made can also increase ownership and engagement, which in turn can boost productivity.
4. Leave some room for unforeseen situations
When creating a workable budget, it’s important to build in some flexibility so that unforeseen situations won’t leave you scrambling to make budget cuts. One way to do this is to set aside a fund for unplanned expenses such as equipment failures, labour costs, or economic trends.
Even though certain things are out of your control, budget variances should always be carefully reviewed so you can understand what may have gone wrong and generate more accurate predictions.
5. Review your budget on a monthly basis
The only way to make sure you’re staying on budget is to review it on a monthly basis. Regular reviews of your income and expenditure will allow you to spot any variances early on and make adjustments as necessary. For example, if you notice that one department is in danger of going over budget, you can look for other areas that might be coming in below budget and balance things out.
Are you a non-financial manager with a budgeting responsibility? If so, what are some of the things you wish you’d known about developing and controlling a budget when you first started out?
Visit our Business Skills and Productivity Library for some tips.