I really dislike budgets. I don’t mind talking about money, but it seems budgets are all about spending, and as a tight German (like my daddy) spending sends a chill up my spine. Ha, so maybe that’s why we do budgets around Halloween each year!
Of course budgeting is a necessary evil, and there are many benefits to it. Over the years I’ve learned a lot of lessons from my own budgeting practices and from being the victim of other leaders’ budgeting tactics.
Here are a few simple suggestions as you head into your budget season.
Two budgets is too confusing.
I was surprised to know that some companies run with two budgets: a “reality budget” and an “optimistic budget.” It’s kind of like a plan A and then a plan B. Or it’s like setting different levels of goals:
- “Need to hit it or we’re in trouble” goal
- “Really want to hit it” goal
- “Wow that would be great” goal
- “Have no clue how to make this happen” goal
Budgets don’t inspire people, so don’t try to motivate your sales team with the budget! Give them a sales document with the annual goal, quarterly hit goals and monthly/weekly activities that need to happen to hit those goals. Align their spending with their monthly performance.
Cover your investing and spending bases.
Spending is what you need to do to maintain the same level of success as last year. Investing is what you will spend in addition for future growth. Make sure you cover both in your budgets.
Don’t forget the team!
People should be your No. 1 investment. Every budget should address bonuses on performance, recognition needs, celebration needs, training needs, and leadership coaching needs.
Goals come first.
Where do you want the top line to be? Then work your bottom line with the budget. Warning: Do not try to hit your goals by cutting back! The bottom line only excites those that get to play on it. If you don’t open your books to show your team the bottom line, then don’t expect it to be a motivator. Motivate off the top line and keep that visible.
If the budget season frightens you, then spice it up a bit and approach it as a sales process. Don’t just plan how you will spend your money. Align your budget with the sales goals and key initiatives that will get you there.