25 Finance Tips

By Canadian Management Centre

Whether budgeting is your sole responsibility or you manage a team responsible for it.  Here are some tips to help make the process easier.

  1. Benefit from other budgeters' experience. Ask peers about previous budgeting cycles. Find out what worked for them and what didn’t. Emulate what worked, avoid the pitfalls.
  2. Consider what budget lines you want to defend as you prepare your budget.
  3. Compile all team or group budgets and reconcile differences. Also, watch for errors of omission, like for overhead items such as office equipment and supplies.
  4. Develop contingency plans for improved business. Ask yourself and your employees the question, "If business conditions become favourable, how can we leverage the growth spurt?"
  5. Ensure that managers document their assumptions and include these in the financial information they provide. They are critical to your analysis of the numbers.
  6. Work with managers to build a development plan as it relates to financial acumen.
  7. Develop a standard format for financial performance reviews, focusing on what managers need to know to make better decisions.
  8. If some managers lag behind others in their financial knowledge, hold review sessions conducted at a slower pace where individuals are encouraged to ask even the most basic of questions.
  9. Challenge departments to identify the assumptions they are making, estimate the likelihood that their assumptions may be incorrect, and the impact on the financial plan if they are wrong.
  10. Graph revenues by period for the past two or three years. Look for trends, patterns and unusual variations. Consider the implications for future revenue growth.
  11. Build up a backlog of cost-cutting tips over the year. Whenever you see or read something that might work in your department, jot it down or cut it out and save in the event it is needed.
  12. Stock as few supplies as you can safely get away with, especially if supplies can be purchased and delivered quickly.
  13. Invest in cost-saving improvements. Look for ways to spend money that will ultimately save money, such as mechanization or replacement of slow machines with newer, faster ones.
  14. Use your cost variance reports to guide cost control actions.
  15. When you want costs cut, say so. Don't cloak your intention in the term "cost improvement."
  16. Stay away from unnecessary jargon to explain your budget aims to senior management.
  17. Always develop a budget and plan, even if the future is unpredictable.
  18. Don't confuse your firm's budget needs with what you want to accomplish.
  19. Don't pad your budget - you'll accomplish nothing from doing it.
  20. Do not underestimate the time you will need to gather relevant information, formulate plans and make a budget a realistic planning tool.
  21. Avoid the temptation to spend all you are authorized to use; others may be able to use those funds.
  22. Be aware that technology changes will affect your costs.
  23. If you are given no direction, predict that the average raise will be the same as this year's average in allocating staff costs.
  24. Keep careful notes of the reasoning behind calculations in your budget. Weeks later, when a particular number is attacked in a review, you may not remember how you arrived at that number.
  25. Do not cut your expense projections to the bone in your first submission. Remember that the first cuts in your budget by your boss may not be the last.

 

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