Budgeting and allocating resources can be a very challenging task. There are any number of things that compete for budgeted dollars. This can sometimes be overwhelming and difficult to prioritize. Because of this, having a good prioritization model for business decision making can take some of the guesswork out of such decisions.
Department managers often get requests for the newest software, the newest phones and gadgets, the most recent model of office equipment, etc. Without a streamlined process to prioritize decisions, managers can end up wasting valuable budget dollars.
So what are some things to consider when making a budgetary decision?
1. All spending and budgeting decisions should be based on a simple decision model and asking the question. Is this expenditure a:
Want – something that would make the job easier;
Need – something that is important to get the job accomplished;
Have-to-Have – something that is necessary for the success of the operation;
For example, a new version of a software program is available. The question that should be asked is, is this something we want, need or have-to-have? The obvious answer would be it can probably wait even though it may make the job easier. However, if the copy machine goes down and putting together sales packets is part of the daily operation, this request would fall into the have-to-have category. This is an expenditure that affects the success of the operation, so the resources need to be available.
2. Are there budget dollars available to spend? As part of the budgeting process, dollars should be budgeted specifically for emergency expenditures that would cover the have-to-have spending decisions. If there are not budgeted dollars available, are there other budgets that could be modified to free up available dollars? For example, if there are dollars allocated for a special event, are there ways to cut some of those costs so you can put those dollars toward something else or are there overtime hours budgeted that can be controlled to free up resources for something else?p>
3. Does the spending line up with the business goals and ultimately will the spending get the organization closer to the vision? For example, a conference comes up that is not budgeted. The question to ask is, will this conference help better equip staff for completion of business goals? If not, even if dollars are available, they probably should not be spent.
As managers, we are faced with spending decisions on a daily basis and unless we have a good foundation for decision making, we can easily overspend budget dollars.
Finally, managing a budget is a skill that all managers need to learn. Part of that skill is having a good understanding of where the organization is going so that all spending decisions are made in accordance with the vision and strategic plan.
