Budget Management Tips for New Managers

Budget Management Tips for New Managers Budget Management Tips for New Managers When an employee is promoted to his or her first management role, it is likely that this will be the first time he or she manages a department budget. Most new managers receive little or no formal training in how to develop a budget forecast, track their expenses, or how to make mid-year adjustments. They are often handed a spreadsheet or report from their manager, or the finance department, and expected to know how to do it, or learn by trial and error. While “trial and error” can be an effective way to learn a new skill, it would be better if a new manager didn’t have to make too many painful errors. Here are a few tips if you have just been promoted as a manager with a budgeting responsibility. Invest the Time to Learn Right From the Start There is no better time to ask “stupid” questions than when you are brand new to something and have never done it. Better ask and spend the time upfront in learning, than wait until someone has to point out  your mistakes. Request time from your manager (or predecessor if you can) to review the underlying philosophy, the overarching goals, the format, and each line item. If your organization has a finance person, ask that person to spend time with you as well. Most will be flattered and willing to share their expertise. After all, if they can train you how to do things according to their specifications upfront, you’ll be less of a headache for them later on. Take a “Finance and Budgeting for Non-Financial Managers” Course Check with your local university business schools, under “Executive Education.” Most business schools offer one- to three-day, non-credit courses. During or after the course, take the time to review your company’s annual report and understand the various financial ratios and reports. Manage Your Department Budget Like It’s Your Own Business When we work for large organizations, we tend to treat “the company’s” money as if it grows on trees. It doesn’t, and it’s now your job as a manager to take personal ownership of your department’s resources. Be a Team Player If possible, review your manager’s budget. While it’s important to take ownership of your budget, your unit is part of a larger entity. Ask your manager to show you where your budget fits into and supports the big picture as well as the interdependencies with your peers. There may be times when another department needs money for goals that are a higher priority than yours. Don’t wait to be asked or have it taken away- be proactive and offer to help your peer manager. Youll be seen as strategic and collaborative. Don’t Play Stupid Games Just because “everybody does it” doesn’t mean it’s not stupid and bad for the company. An example of a typical stupid budgeting game that managers play is “use-it or lose-it spending.” It is when you are getting close to the end of the year, and your budget is running under your forecast. In previous years, when you underspent, your next year’s budget was set based on that year’s actual. So, in order not to have your budget cut again, you go on a shopping spree- buying stuff you don’t need or stocking up just in case you might need it. Track Your Expenses Monthly and Make Proactive Corrections Don’t assume that “someone” will tell you when you are over budget. In fact, you might even have to ask for monthly reports or keep track yourself. Don’t wait until the end of the year, when it becomes a surprise to you and your boss. By then, it’s too late to investigate and make corrections. Be accountable, measure yourself, and proactively report to your manager. Be Transparent and Involve Your Team Share your budget with your team, perhaps even  getting them involved  in setting up the forecast. Involving your team and helping them understand the budgeting process creates a sense of shared ownership and encourages your employees to find creative ways to manage expenses. Be Strategic Don’t just take last year’s actuals and add 10 percent to next year’s forecast. Start with developing a strategy and goals, then determine the resources required to achieve those goals. If you require more than last year, prepare a business case to justify your request for additional funding. Don’t Overdo It While managing the budget is an important role for a manager, never lose sight of the most important assets: your people! Make sure you are spending at least five times the amount of time developing your team than crunching numbers.