ABC – A Budget Communication

Apr 24, 2014

I know. .  I know. .  do not say the “B” word right now. You finally got everything into place, running smoothly and do not want to think about a budget again until November! I’m sorry, but I recently read an article about better communication called, “How to better connect – and communicate – planning, forecasting and budgeting.”

shutterstock_125338145The article’s title focused on communication, but really it is not until the last paragraph that it seemed to really touch on communicating. I think as accountants we try to communicate, but we are just not that great. I do agree, however, that budgeting itself has to evolve as times change. It needs to be a dynamic tool that can be updated as needed and can be used to compare to actual results. A static document can easily become outdated and ignored.

I am surprised and not surprised that spreadsheets still rule. Excel is so widely used and I think it is an excellent tool but there can be critical errors that ruin the forecast. I am surprised because there are many software companies that have developed programs specifically for budgeting. I am not sure if people are apprehensive to try the new software or if the developers do not do a good job promoting it.

Once the budget is established, its falls back to communication. If people know what their budget is and what the expectations are, they will be more likely to try to meet their goal. If they are unaware or do not understand the consequences, then why will they try? As accountants we often think a lot of what we do is common knowledge. We need to recognize we do not understand everything the sales team, or the developers do and vice-versa. We must TELL them!

It is also very important to be balanced between optimism and some skepticism. Be careful to say the sky is falling if it isn’t, but also make others aware when things need to change to be able to continue. You would be surprised how often the manufacturing team can change things up to save money if they are given specific parameters to maintain. If you tell them we need to cut costs they may say no. But if you effectively communicate and say we need to cut costs by 2% you would be amazed at what they can do.

Categories: Cost Accounting