Succeeding as a manager requires a robust set of business skills. In addition to knowing how to navigate key processes like change management and decision-making, managers need an intuitive understanding of finance to drive performance and create value within their organization.
One of the most important finance skills for managers to master is budgeting, or the process of preparing and overseeing a financial plan that estimates income and expenses over a defined period.
Before delving into how you can more effectively budget and improve your management skills, here’s a look at how managers leverage budgets.
How Managers Use Budgets
At its most basic level, a budget ensures that a team or department has the resources needed to achieve its goals. For managers, the budget serves as a vital tool for:
- Communicating expectations and goals to stakeholders
- Mobilizing teams and departments around organizational objectives
- Assessing group and individual performance
- Gaining insight into an organization’s financial health
- Allocating resources strategically and appropriately
If you want to reap the benefits of these techniques, here are six budgeting tips you can employ to become a better manager and advance your career.
Budgeting Tips for Managers
1. Know Your Organization’s Budgeting Timeline and Procedures
Familiarize yourself with your organization’s budgeting deadlines and procedures at the outset of the process. Your numbers may be reliant on financial targets set by your supervisor and other department heads. Knowing when specific deliverables are due will help ensure you effectively manage your time and connect with stakeholders who can inform your allocation decisions.
2. Leverage Financial Data
In addition to connecting with stakeholders, leverage existing financial data in your decision-making process. By analyzing financial statements, such as the balance sheet, income statement, and statement of cash flows, you can gain insight into your organization’s financial health and performance, and determine how to suitably apportion resources.
According to John Wong, Harvard Business School Online’s Senior Associate Director of Financial Planning and Analysis, the key is to use historical data for reference, rather than as a starting point for your budget.
“Business conditions change rapidly, and basing your current budget on historical information can adversely impact budgets within other areas of an organization,” Wong writes in a previous blog post.
Related: Cash Flow vs. Profit: What's the Difference?
3. Work Toward Goals
Understanding your organization’s goals is vital to successful budgeting. This knowledge can enable you to develop a clear picture of how your team’s work fits into the company’s key objectives and advances its overarching mission.
For example, your firm may be planning an important organizational change initiative, such as a redesign of its website. As part of this process, your team will be responsible for writing web copy, creating videos, and designing graphics.
With these requirements in mind, you can break your team’s work down into specific deliverables and line items within your budget, accounting for all the resources your employees will need to produce the desired results and push the project through to completion.
4. Evaluate Performance
By preparing your budget with your organization’s mission in mind and a detailed set of deliverables, you can develop a roadmap for evaluating performance once the fiscal year is underway.
Keep track of expenses so you can compare your spending against projected costs, and stay in close contact with other stakeholders within your organization to ensure your team’s timeline for completing work is in sync with company-wide project plans.
The deliverables in your budget can serve as key milestones that inform how you manage your employees’ time and deliver feedback on their contributions. If a particular task is at risk of not being completed or incurring additional costs, be prepared to modify line item amounts and delivery dates, and consider strategies you can employ to realign your team and improve performance.
Maintain this kind of flexibility throughout the budget management process. Unexpected circumstances can arise, so be ready to reallocate resources when necessary to ensure your organization is well-positioned to achieve its goals.
5. Communicate Progress and Results
Clear and consistent communication is crucial when overseeing a budget, as your team’s work is typically just one element within a larger network of moving parts.
Establish a regular cadence for meeting with key stakeholders to report your employees’ contributions and results. Use data visualization techniques to illustrate your team’s progress, and make it a point to highlight any accomplishments or shortcomings that could have implications that extend beyond your direct reports.
Carve out time to update your employees as well. Keeping them apprised of the impact of their work can help them feel more engaged and motivated.
Related: 8 Communication Skills Every Leader Needs
6. Hone Your Financial Knowledge and Skills
Bolstering your financial knowledge and skills can pay dividends when it comes to budgeting.
By advancing your education through such avenues as an MBA program or online finance course, you can broaden your understanding of key financial terms and concepts, enabling you to better communicate with finance and accounting professionals within your company and identify ways to create value when preparing your budget.
For Paul Accornero, an international commerce director, taking the online course Leading with Finance was a way to gain the know-how to make more informed business decisions and be a more effective manager.
“I use what I learned on a daily basis,” Accornero says. “Even though I’m not in a finance role and operating in a general management position, I make decisions utilizing the principles we learned.”
Driving Performance with Budgeting
Budgeting is an essential management skill that can drive the success of not just your team, but organization. With a clear understanding of your firm’s processes and goals, a well-developed plan for measuring progress and performance, and a knowledge of financial principles, you can make better business decisions and excel in your role.
Do you want to develop a financial intuition that will give you the confidence to make better decisions in your career? Explore our six-week online course Leading with Finance, and learn how to improve your understanding of the market in which your organization operates and communicate decisions to financial stakeholders.
