Confessions of a Former Budget Accountant
This tale goes further than Benjamin Franklin’s “If you fail to plan you’re planning to fail.”
Can Budgeting Take Up a Whole Job?
It was in 1987, my birthday and I was heading out for an interview. It was with Wellcome Pharmaceuticals. The interview went well, and within a month I was working as a budget accountant.
It was my first truly professional role, where I had an office and everything. My Boss, the Commercial Manager was two floors up on the executive level. He reported to the CFO and CEO. He was one of the smartest guys I’d ever met and well balanced in his approach to work and life. He introduced me to a policy of never working weekends, “Work Monday to Friday all you like, but if I ever see your swipe pass used on the weekend it’ll be your last day in the office.”
Wellcome was a fortune 500 business, the second I’d worked for following IBM, several were to follow before I realised that I just really didn’t like accounting.
It was the first time that I had direct my role had me in regular contact with the divisional directors of such a business. Wellcome was one of the best run businesses for which I’d ever work. One that had a strong ethical structure and an approach that respected the stakeholders.
It was their focus on the numbers that I still remember.
When the Budget is Just Part of the Plan
From where I sat, the numbers were everything. All the stories that combined to fill the plan seemed just that. As life happens, the stories would change, yet the budget remained the constant yardstick. From where I was sitting, it seemed the only constant at times.
It was a time of turmoil for the business; it was the late 80’s after all. The divisions seemed almost fluid. Challenges in one business unit seemed to constantly be offset by an opportunity in another. Somehow the business managed to keep exceeding the budgets set.
I remember working on a computer that was so antiquated; it didn’t even have a screen, I’d type in the budget lines into what looked like a typewriter (one of the electric IBM models). Once checked, by printing out the line items, we’d send the financials to England.
Quarterly Rolling Forecasts
The budget wasn’t the end of it. With reporting so tight for the business each quarter we’d go through the process again.
Six weeks of accumulating all the supporting documentation and information to produce a new forecast, always projecting out two years. Those six weeks were frantic. It was close to the end of one of these cycles that the workload was such that I needed to head into the office on a Sunday to finalise information before a board meeting Monday Morning, and the reprimand from my boss that afternoon.
It was a crazy role, six weeks of 12-15 hour days followed by hunting for something to do for the next six. The lazy week’s I’d call them could be painful even boring as the challenge wasn’t there.
The forecasts would project out the following two years, hence there was always a strong, even if changing plan.
Living the Small Business Dream
In 1999 over ten years later I established my own business. I’d not been an accountant for over seven years at the time, and like many small business owners, I knew I needed a business plan. That’s OK, I thought, I’ll just put a budget together, and that should be right. That’ll keep us on track.
How wrong was that…
Budgets don’t do anything!
Do I believe they’re worthless? Of course not, just without the supporting plan, they’re really not all they’re cracked up to be either.
Without having a strong plan to be followed, the business went through a series of highs and lows. We managed to stay afloat, in fact, to have some brilliant times, make some money and have a lot of fun.
Then the GFC came. The fun police of all fun police! What a downer.
Before that, the business had grown to a turnover of $3.5M with 15 staff, but it lacked consistency.
Budgets we had, consistency we didn’t.
The Missing Link
Now here’s the point I never really got.
The budget was the result of the business plan, not the other way around. You’re probably sitting there going No Shit Sherlock… but I always thought the numbers came first, and the plan was the justification.
OK – So no longer an accountant, I realised that the budget is the end result of the things you’re going to do. The budget is the financial representation of what happens in the business.
The Vision, this years mission, the Marketing Plan, and Operations all lead into the Budget, not the other way around. (Damn I can be slow)
The World Keeps Changing
To keep up or even move faster, manoeuvre better, anticipate and lead is the key challenge. If not, we’ll be reacting and playing catch up.
That’s why I encourage my clients to have a living business plan. It needs to be live, or we’ll get behind too fast. What was anticipated could be achieved may have been over-ambitious, or it may have been achieved more quickly.
When you have a scorecard that produces a result, you can work the scorecard to accelerate the development of the business where you see things working, and you can adjust performance when it’s not. Being able to identify shortfalls because of the reporting is critical here.
Hence the living Business Plan.
Review and Reset
Each quarter as you review performance you can project out 12 months (two years is so far into guesswork it’s not worth the time).
Taking the time each quarter will keep your marketing a step ahead.
“The majority of men meet with failure because of their lack of persistence in creating new plans to take the place of those which fail.” Napoleon Hill
Here’s the challenge, many of us feel that taking the time to recast the plans and budgets every quarter is taking too much time away from our business. It’s seen as a cost, rather than the investment in staying ahead of what it really is.
Keep the budget as a yardstick and update your methods, your approach and your processes to reflect the best path forward for the business. To stay ahead of the changes, you need a sound strategy and plan, one that allows for change.
That’s a living plan.