Some managers view budgets as an annual nuisance, like preparing taxes. But others know better. Learn from these savvy business leaders how to transform a dry budget into an evolving life form:
Track your progress. Just because you set yearly budgets, that doesn’t mean you should forget about them the rest of the year. Create weekly or monthly benchmarks so everyone can watch the numbers and adjust their game plans.
“We have an annual sales goal of $1 million,” says Lucia Rodriguez, head of DIA Inc., a computer cable firm in San Francisco. “That translates into $4,333 a day in sales, or $83,333 a month. We know to the penny to what extent we’re keeping to budget on a daily basis.”
Educate employees. “Sharing a budget can be counterproductive if it scares or alarms the uninformed,” warns Don Coakley, business manager at Quality Biological Inc., a bioscience firm in Gaithersburg, Md. “You have to educate participants to read the information and examine timing differences before they compare budgets.”
Be sure that employees compare similar time periods and numbers and that they’re aware of anything that may affect the comparison.
Enlist employees in strategic planning. Once employees are savvy at reading financial reports, they can help you assess capital budgeting options and build realistic financial projections.
“Focus on your ‘capability investment plan,’ which is your capital budget plus the money you need to train your work force,” says Rick Seaman, author of The Path (Guidance Press, 1999). “Then teach your employees to read an income statement and enlist them to help you think strategically.”