Let’s look at some of the reworks you can expect.
I mentioned that your manager may make cuts in your budget. Peers are also developing their budgets, and they may have different needs than your unit. As your manager weighs your needs against others, you will need to recalculate costs, and possibly even reconsider your initial plan.
Your manager’s manager will also want to put in two cents. Finally, your company’s chief financial officer will meet to review the budget. You may be present at this meeting. During this session, you should clearly grasp the agendas of each member of the budget committee, understanding why they are there and what they are trying to achieve.
Certainly, each reviewer will expect you to justify all your numbers. So be prepared with forceful arguments for all proposed plans. Share the assumptions on which the plan and subsequent budget are based—if asked. If your numbers are questioned and you are told to redo the numbers based on the group’s thinking, you should do so.
If your unit is responsible for producing revenue, you may be pressured to forecast a significantly higher income number than you first wrote down. You may also be expected to cut back on cost projections, even where you have argued the consequences of such cuts on unit performance. If you get either request, you will have to amend your budget accordingly, but tactfully remind your manager or other executive that you are making the adjustment at their request. This reminder frees you somewhat from responsibility if your original forecast turns out to be more accurate.
Some experienced managers have told me about burying some added money in the budget to cope with anticipated budget cuts. I have mixed feelings about this. Padding is clearly the enemy of good budgeting. On the other hand, a manager’s first responsibility is to get approval of the resources needed to do next year’s required work. Often, if you have a good relationship with your manager, indiscriminate cuts can be avoided.
I had a supervisor who seemed to have a knack of getting through budget reviews with minimal changes. First, Ernie would review his budget with his own manager, and they would agree on the numbers. He then could come to budget reviews with our chief financial group knowing that his manager was behind him.
But Ernie went further. He brought with him stacks of documentation to justify his assumptions. Asked a question, he always had a ready and lucid response. He had learned over the years what were the hot button issues, current problems, and priorities, and he had reviewed his budget beforehand to anticipate questions and prepare good answers.
He didn’t do poorly, either, when it came to his projections. Ernie’s presentation of his budget was impressive. He recognized that to get the budget through, he had to sell it to our financial group. He never assumed it would be accepted without supporting arguments. Nor did he think he could flim-flam our financial staff. So he could make a case for every dollar he promised to make or every dollar he needed to run our division.
I learned one thing very early in my own budgeting experience by making a mistake: never volunteer information. Wait until you are asked about something, then reply clearly and succinctly. After volunteering information on one occasion, I found myself redoing several budget lines.
I watched Ernie’s style, and I learned from it. I also learned why he increasingly wasn’t questioned about his revenue forecasts or cost predictions. He built a reputation for doing what he promised. Further, he had proven over time how knowledgeable he was about his data. Consequently, budget reviews went relatively smoothly.
This is not to say that Ernie wasn’t asked to cut costs or increase revenue projections. But he was heard out when asked to make cuts, and often senior management agreed to compromise. Such are the benefits of building a reputation as a skilled budgeter, a reputation you want to gain.