3) Take a long-term view
Take a two-to-three year view of the budgeting process and set critical annual milestones.
The longer term view means that all the good work done this year, isn’t lost next year, or that big projects that will deliver benefits beyond this year’s budgeting process can still be actioned.
Similarly, and following the last point, budgeters would benefit from engaging procurement in these long-term conversations – given their close working relationship with each division of the company. Procurement are well-placed to advise on the long-term strategic needs of the company, and influence the budget to achieve this; advising on the best way for the company to get value for money in the long-term as well as the short-term.
For example, should your IT department take the hit and invest in an expensive piece of technology this year as prices show signs of increasing? Or should they hold off for a few years and wait for a forthcoming innovation in the wider supply market? What implications will these decisions have on the operations of your business? Decisions such as this are critical for budget holders to consider.
4) Agree the governance behind the process in advance
Who is responsible for each aspect of the budgeting process, is it a sole responsibility or a cross-functional responsibility? Agree a governance structure around managing the challenges and targets prior to beginning the budgeting process. Employ the RACI governance model and map the involved functions to this.
For any divisional budget targets, ensure that each division is responsible, but that procurement is accountable for achieving these targets. This encourages divisional leaders to work collaboratively and effectively with procurement to maximise value for money, reduce wastage and create total spend effectiveness.
5) Encourage the right mind-set
Make sure all those involved in the budgeting process are coming at it from the same perspective. Ensure there is a clear message around what you are looking to achieve.
Again, look to your procurement team here to help influence internal stakeholders and cultivate an environment that encourages everyone around the budgeting table to look for opportunities to make costs more effective, rather than simply looking for areas to squeeze out savings.
Soothe any resistance by reaffirming the end goal and encourage ideas around new processes, procedures, objectives and strategies to achieve this.
In short, the implementation of a strategic and effective budgeting process is critical to get right. It sets the tone for the business for the following year, challenges mind-sets, and encourages collaboration. Simply repeating the same tired process year after year is not only laborious, but is also an ineffective approach. It stifles innovation, and creates a stagnant culture that is not conducive to spend effectiveness.
Guy Strafford is EVP and chief client officer at Proxima.
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