By Ryan Velez
At some point when running your business, you need to hand over the reins of budget management to someone other than yourself. This can be a scary time, especially when you hear all the stories about keeping employees from running roughshod over your potential financial stability. However, The Network Journal is here to help, with some basic advice for your own budget management system.
The first step is making sure that you have a budget and forecast, as silly as it sounds. In its most basic form, this means figuring out what your costs should look like based on expected revenue. You also want to avoid breaking things down too much, as if you get caught in the details, you may end up spending company time you don’t have. For example, look at your overall advertising expenditures rather than trying to see how each platform is performing. Leave this to your employees, and make sure that they stay within their allocations.
Of course, to make this happen, it’s important that you have the bookkeeping that allows you to make educated decisions. This means covering accounts of costs that were incurred by a specific department or group. For example, if you take a client out to lunch to close a deal, then this should be categorized as a sales expense. If you buy lunch for employees in the office, then this would fall under meals/entertainment in your operations budget. If things aren’t properly allocated, then you suddenly can’t determine exactly what department is spending the most.
Another thing that you want to do is make sure that you identify time periods for setting your budget. This is about being fair to your employees. If your plan is to close out your books every quarter, then asking your departments to set a monthly budget is unfair: their financials are not in place for them to make a proper estimate. In this case, it may make more sense to go for bi-annual or annual budgets. To make this clear, you can send an email explaining this, reading like “At the end of quarter two, you were at 75 percent of your annual budget. Please avoid going over budget and slow your spending down the rest of the year.” Smaller companies may want to go to quarterly budgets so they have even more wiggle room to work with.