Free The Mobile MBA: 112 Skills to Take You Further, Faster (Richard Stout's Library) by Jo Owen Page B
Authors: Jo Owen
the only realistic response to the squeeze is to cut costs. As ever, short-term savings can lead to long-term costs, so you need a way of insuring yourself against this.
The practical approach to managing budgets looks something like 51/53. You still want to get ahead on sales and outputs if possible. If you can achieve53% of your goal in the first half, that is a good start. But you also need to find a way of protecting your spending. Since you know your budget will be squeezed in the last quarter, it makes sense to have no discretionary spending items left in the last quarter. In practice that means you have to spend ahead of the curve, selectively. That is not prudent, but within reason, it is practical. For instance:
• Make essential investments early in the year. These might be test markets, technology spend, market research and the like. Remove them from the coming squeeze.
• Spend discretionary items which are dear to your heart early. If you want a conference for all your units and team members, do not schedule it for the last quarter.
• Commit budget where you can. If you have advertising planned, make sure the media spend is committed. Advertising is a soft target for bosses who do not understand that cutting advertising kills your brand and your sales.
• Build a slush fund. Since you know there will be a squeeze, identify in advance where there is some fat to be cut. Simple acts such as delaying the start of new hires by a few months will allow you to build up reserves which can be released when necessary.
once the budget is set you have entered into a contract with your bosses
Finally, remember that once the budget is set you have entered into a contract with your bosses. You have to deliver on your commitment. Budget blues are the driver of much management angst, pressure and grief. Manage your budget tightly from day one and you have a chance of minimizing the grief at year end. If you are falling behind on budget, act swiftly. Cut fast to get your running rate of costs down: the longer you leave it, the greater the cumulative gap becomes and the less time you have to recover. The earlier you deal with your budget crisis, the smaller it is.
Overseeing budgets
You will find very little written about how to control and oversee budgets which you have delegated down to managers beneath you. This is a vital art: if you cannot control the delegated budget, you will quickly find yourself in severe trouble. Here are six hard won lessons from the front line.
----
Six hard won lessons from the front line
1. Be unreasonable . There are always reasons why costs overshoot and revenue falls short. But if you accept excuses, you accept failure. If you see that budget might be missed, you simply have to focus on one question: “So what will you do differently to make budget?” These are uncomfortable but necessary discussions.
2. The budget is the budget is the budget . You will be asked to make budget revisions, which normally means reducing the budget. Don’t. A budget is like a contract: your managers have promised to deliver certain results for certain resources: keep them to that promise.
3. Cash versus accruals . Cash is easy to spot: you have either spent the money or not. Accruals are the hidden iceberg that sinks many a budget. When reviewing a budget, make sure that you have identified every forward commitment, even if the purchase order has not been signed, and that it is reflected in the budget. You want to know about all the bad news as soon as possible, so that you can do something about it if required.
4. Game playing . As budget holders we are all used to playing games: hiding and deferring expenses (accruals) and bringing forward revenue recognition where we can. Perhaps we slip the start of a new promotion from the end of this year to the start of next year. Or we hire someone six months later than originally budgeted, which gives us a miraculous but unrepeatable cost saving in this
The practical approach to managing budgets looks something like 51/53. You still want to get ahead on sales and outputs if possible. If you can achieve53% of your goal in the first half, that is a good start. But you also need to find a way of protecting your spending. Since you know your budget will be squeezed in the last quarter, it makes sense to have no discretionary spending items left in the last quarter. In practice that means you have to spend ahead of the curve, selectively. That is not prudent, but within reason, it is practical. For instance:
• Make essential investments early in the year. These might be test markets, technology spend, market research and the like. Remove them from the coming squeeze.
• Spend discretionary items which are dear to your heart early. If you want a conference for all your units and team members, do not schedule it for the last quarter.
• Commit budget where you can. If you have advertising planned, make sure the media spend is committed. Advertising is a soft target for bosses who do not understand that cutting advertising kills your brand and your sales.
• Build a slush fund. Since you know there will be a squeeze, identify in advance where there is some fat to be cut. Simple acts such as delaying the start of new hires by a few months will allow you to build up reserves which can be released when necessary.
once the budget is set you have entered into a contract with your bosses
Finally, remember that once the budget is set you have entered into a contract with your bosses. You have to deliver on your commitment. Budget blues are the driver of much management angst, pressure and grief. Manage your budget tightly from day one and you have a chance of minimizing the grief at year end. If you are falling behind on budget, act swiftly. Cut fast to get your running rate of costs down: the longer you leave it, the greater the cumulative gap becomes and the less time you have to recover. The earlier you deal with your budget crisis, the smaller it is.
Overseeing budgets
You will find very little written about how to control and oversee budgets which you have delegated down to managers beneath you. This is a vital art: if you cannot control the delegated budget, you will quickly find yourself in severe trouble. Here are six hard won lessons from the front line.
----
Six hard won lessons from the front line
1. Be unreasonable . There are always reasons why costs overshoot and revenue falls short. But if you accept excuses, you accept failure. If you see that budget might be missed, you simply have to focus on one question: “So what will you do differently to make budget?” These are uncomfortable but necessary discussions.
2. The budget is the budget is the budget . You will be asked to make budget revisions, which normally means reducing the budget. Don’t. A budget is like a contract: your managers have promised to deliver certain results for certain resources: keep them to that promise.
3. Cash versus accruals . Cash is easy to spot: you have either spent the money or not. Accruals are the hidden iceberg that sinks many a budget. When reviewing a budget, make sure that you have identified every forward commitment, even if the purchase order has not been signed, and that it is reflected in the budget. You want to know about all the bad news as soon as possible, so that you can do something about it if required.
4. Game playing . As budget holders we are all used to playing games: hiding and deferring expenses (accruals) and bringing forward revenue recognition where we can. Perhaps we slip the start of a new promotion from the end of this year to the start of next year. Or we hire someone six months later than originally budgeted, which gives us a miraculous but unrepeatable cost saving in this
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