Why Your Budget Is Meaningless
Budgets.....the bane of every finance person's existence.
We spend 3-4 months trying to get them perfect. To only start the year with them already out of date
And then spend a day or so every month comparing actuals to them - leveraging the phrase "phasing" for variances we can't explain or bother to look into.
A recent poll I ran found 43% of FBPs are spending 50% or more of their time on budgets. I am sorry, if that is you.
If it is then you are not an FBP. You have probably just had your title changed. You simply can not be a FBP if over half of your time is spent doing things that are not solving problems and helping the other functions.
Great FBPs know if its not in the budget then it doesn't mean it shouldn't be done. And if it is in the budget it doesn't mean it should be done.
Great FBPs know there is only one number in the budget that matters. And it is the one at the end of the year everyone is bonused on (or incentivised to hit).
Whether that is EBIT, Sales, Opex it doesn't matter. It will be different for everyone. The commercial person who is in charge of that "budget" and achieving it is thinking about one thing. Hitting the total number at the end of the year
They don't care about the line by line month by month minutia. They don't care if travel is off this month if it is going to be under come the end of the year. And they certainly do not care about the explanations finance want for being off on one line in month 4.
They are focused on the number at the end of the year and hitting that.
And as a great FBP if you can turn your attention to that your conversations around budget will fundamentally change.
You will rarely use the word phasing or timing. Instead you will talk about if it is on track or off and what you are doing about it.
You will worry less about what the number is now, or was in the past, and focus more about the future.
And non finance will suddenly open up to you because you are thinking about the budget the same way they do and helping them achieve it.
Let's be honest most budgets are a top down, bottom up mangling together of square pegs and round holes. And by the time its signed off by the board resembles nothing non finance was involved with in its early stages.
So by comparing to the detail within it to non finance, you are opening yourself up to a conversation they already find frustrating.
So make it easy.
Focus on the number at the end of the year and how things are tracking toward that. And get AI to do the line by line month by month commentaries for the board.
It will save you time, improve your commercial conversations and improve your relationships with non finance. And it will make you a way better FBP.
