Building a budget is not just an accounting function.
The more engagement and buy-in you have in the budget building process, the more commitment and success you will have executing the budget. Don’t make the mistake of isolating the budget building to the accounting team. Begin by assigning sole ownership of the budgeting process to one person. This person, the Budget Builder, will build the budget by working with the key departmental leaders within your company.
Building the budget is iterative, it takes time.
Give your team the time to build an effective budget. The Budget Builder meets with each of the significant departmental leaders in your business. This process usually begins with the sales lead and moves onto the other department heads, typically from sales to operations to the other primary functions. During this meeting time they will answer two questions:
(1) What do you think we will do in revenue next year?
(2) By what means?
Through research and refinement, and several meetings, your team and you will become more confident in the prediction for the upcoming year.
Building the budget requires strong data.
When the major department leaders know the predicted revenue and the means by which they will achieve this revenue (i.e., specific volume and type of units delivered) they will begin to break down what that means for their department. For example, the operations lead will articulate what the Cost of Goods will be, what the payroll need will be, and so forth. Having departmental data that identifies the relationships between all the moving parts of the business is vital to a strong budget.
Building the budget is a team effort.
Identifying and executing on an effective budget requires bringing people together with a disparate set of knowledge and expertise. There is not one sole person in your company who knows all that needs to be recognized to create the budget. A budget is paradoxical as it is simultaneously a high-level directional compass as well as a granular step-by-step roadmap. Leverage the people that you have, invite them to bring their depth of knowledge to the process and encourage conversation. When you engage your people, you can be confident that the budget will be accurate and achieved.
For companies running on EOS, the budgeting team is already in place. It is their leadership team. Those 3 – 8 leaders on the top line of the Accountability Chart that are responsible for keeping the major functions of the business strong: Marketing/Sales lead, Operations lead, Finance lead and any other key functionary responsibilities that need to be strong to support and grow the business. Companies running on EOS have increased the objectivity of business performance by distilling their data in to smaller subsets of information that is reviewed regularly, drives behavior and ensures the business is on track.
About Traction Coach:
Your greatest asset is your people. At Traction Coach, we are all about maximizing human potential. Specifically, bringing people together to create a great organization. With our partnership, we will focus and engage the talent of your people to deliver results that you dared to imagine. We guide your leadership team through the proven Entrepreneurial Operating System (EOS) which stokes the innate tendency of your people to execute toward a shared vision, to maintain disciplined action that consistently drives progress and to come together as a cohesive team that creates more together than would be possible alone.