Here are six tips to help you prepare a best-in-class budget exercise for 2011.
- Start with a solid strategy review. Don’t rush into the budget exercise. The competitive landscape of many companies was impacted last year. So, spend extra time on reviewing your strategy and make sure that you map the different dynamics that impact on your company.
- Don’t stop restructuring. Finish what you started. Don’t stop the restructuring mid-point. That would be the worst thing to do. Remember, successful Strategy Execution also means successfully executing your restructuring initiatives. So make sure you finish the restructuring you have planned. Don’t leave any loose ends – plan the financial and human resources in your budget to tie them up.
- Think like Johan Cruijff. One of the most successful trainers and players of all time is known for the words: “Every advantage has its disadvantage and vice versa”. You just need to look for them. One example: the current economic climate creates cost consciousness. Use this to your advantage. Take a cost conscious approach to your budgeting. Areas where it would have been impossible to discuss cost reductions might be put on the table today – especially if you base your competitive advantage on the cost side, ride out the wave completely and take advantage of the cost awareness business climate. Keep everyone on a tight budget leash.
- Debate assumptions. Now even more than ever. Discuss the why behind each budget line. Don’t let people seduce you with the line ‘but that’s always been budgeted for’.
- Look for flexible budget solution for the support departments. They were often caught by surprise and responded re-actively. This results in a short-term, stop-go strategy. As a result, the department ends up worse off than before. Support departments need a long-term vision and budget approach as well. Make sure you know the end game – the business model that you would like to aim for – and look ahead at flexible budget solutions as preparation to shift when the time is right.
- Review all project spending. Don’t just re-launch a project that has been put on hold. Before you know it, you are back at business as usual with the old, revived projects sucking up all available resources (and therefore money). Don’t assume that what was needed before last year is needed today. Re-evaluate, challenge and budget accordingly.
