Budget Time

04Nov08

I wrote this post on October 18th, but then forgot to post it.  Doh!  It is still relevant though so here you go:

I am behind on my blog and new reading and spent some time tonight trying to catch up.  I read Mike Rothman’s latest post where he talks about budgets.  It is a quick read and gives good advice on planning your budget in this crazy economic time.  Being that time of year we are in the process of finalizing the budget for 2009 and thought I’d share our thought process and plan of attack.  The budget planning process is an interesting time of the year to say the least.  We break it out into a few different stages.

Stage One:  Making the List

Each team member gathers their wish list for projects.  Basically this is just to get the juices flowing, if you can think of a project that will benefit the department/business it goes on the list.

Stage Two:  Enter the Matrix

With our lists in hand, we all sit around a table and create a matrix of categories and projects.  This part is pretty simple but allows us to break things down into buckets.  It is helpful to see what areas have a lot of potential projects and which ones only have a few.  This can quickly show me areas where we are potentially lacking or maybe not fully thinking about solutions for problems.

Stage Three:  What is important

Having a list of 50 legit projects may be impressive, but lets be honest, how many are critical?  Too often I have seen companies fall into the “Everything is critical” mentality.  I think the thought process is that if it gets pitched to management as critical then they have to approve the budget item.  Let me tell you something, it is a bad idea!  If you think everything is critical, nothing is critical.  This becomes a difficult stage because no one likes to be told their project isn’t important and the back and forth discussions begin.

What I have done in the past, and what works for me, is breaking items into three levels: A, B, and C.  A’s become the critical projects that without a doubt should be implemented.  Maybe they have tremendous ROI or maybe they are just vital to security, but to be an A there has be be tremendous impact.  B’s are important but not critical.  It may be a great project that will improve areas but if we don’t do it business will function as usual.  C’s are usually the nice to have projects.  They make your life easier but have little business impact.

Stage Four:  The Price is Right

Now that we have our A, B, and C lists we focus on getting accurate estimates.  We try our best to get actual quotes for the A’s.  The B’s have a mixture of actual quotes and educated swags.  C’s are almost always educated swags.

Stage Five:  Check your list…Twice

Time to go back and look over everything.  Are projects in the right buckets?  Are the priorities accurate?  Can you actually accomplish the A list if it gets approved?  What about the B list?  Lesson here is make sure you have the right information and that you aren’t biting off more than you can chew.  If a project gets approved and you can’t get it done you FAIL.  After all, you told management it was important to the business.

Stage Six:  Send the list to Santa

Sit down with management and start the budget battle.  If you have done your homework then you shouldn’t be caught off guard with questions about who, what or why related to a project.  Stress the importance of your A list and fight for them first.  Keep in mind what you can confidently accomplish in the year when asking for B and C approval.  As I stated in Stage 5…..you HAVE to accomplish the approved projects or it will come back to bite you in the next budget process.

Obviously this is a quick list and I didn’t go into detail about diligence, meeting with other departments, reviewing the prior year, etc. but I think you get the general idea.  I’d be interested in hearing what works for others.

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