3 Lessons to Improve Your Budgeting
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It’s budget season.
Too soon, you’re thinking?
We aren’t even in Q4 yet, you’re saying?
I know. You were hoping to avoid dealing with your budget for another few months. We’re barely out of beach season.
Creating a budget is kind of like going to the dentist. Nobody loves it. Some people despise or fear it.
But pretty much everybody likes the feeling of having squeaky clean teeth.
Hopefully, you don’t need convincing that you, in fact, NEED a budget. (But here are 6 reasons why in case you still aren’t sold.)
Today, I want to share three lessons I’ve learned about the budgeting process. Like most lessons in business, I learned them the hard way: by making mistakes.
If I can save you time and energy by avoiding even one of the mistakes I’ve made, I’ll be thrilled (and I’d love to hear about it).
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Lesson #1: Budgeting is a process, not a task
Creating a company budget that you’ll actually use doesn’t happen by locking your CFO in a room for a couple of days.
Building a budget is a conversation between key stakeholders. Then it’s a discussion with department heads. You need to understand the inputs, verify the growth goals, [link to I don’t buy it blog], and identify the resources needed to hit those goals.
No one person in the company has all of that information: it’s a shared body of knowledge.
So if creating your budget feels like a lot of back and forth….you just might be doing it right.
Lesson #2: Budgeting happens so much earlier than you want it to
Once you realize budgeting is a process, your expectations around how long that process should take automatically shift.
Expect that it could take a couple of months to finalize your budget.
When should you start? Probably now. If you begin in September, you’ll be on track to complete your budget by 11/1.
While there may be some fine-tuning in Q4, you don’t want to wait until then for the bulk of the work. For one thing, the holiday season eats up a ton of time.
For another, you want the budget completed before you start annual planning. This could happen as early as December, although many companies complete annual planning in January as well.
Speaking of planning, that brings us to…
Lesson #3: Budgeting is part of a bigger picture
Your annual budget is your budget for the year.
But it’s also not.
It’s also part of a longer-term plan. In our consulting work, we typically use 3-year and 10-year time frames (3 Year Objectives and North Star, respectively)
You’re planning for 2024, yes. But you’re also planning for how 2024 can help you achieve your goals for 2026 (your 3 Year Budget). And even 2034.
The definition of a good annual plan is one that has you successful at the end of the year and on your way to success for the years to come. And not in a sentimental way. In a “we are on track to hit our targets for the next 3 years” kind of way.
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If you have the financial capabilities right now to start building out your budget, then the next step is to get started.
If you don’t have those financial capabilities right now…it might be your lucky day.
You can work with our Finance Services team on a one-time budget project this fall. Most of our capacity is bound up in ongoing engagements with clients, so this opportunity is relatively rare. Contact us here if you're interested.
P.S. The one other lesson I hope to impart here: you should be going to the dentist. If you aren’t going to the dentist—go to the dentist.
