This article focuses on the importance of budgeting with a corporate performance management solution.

Budgeting is a topic that is not very popular in many organizations. It can be an extremely time-consuming project for many employees. This is why it is important to communicate the significance of a budget to all employees so they take pride and ownership of it. Don’t make complex templates as the goal in estimating for the coming year. If employees can’t have small variances, then they will make decisions that only impact their results against the budget and not what is in the best long-term interest of the organization.

Your budget should should be an approximate estimate of how the company will do in the coming year. Provide information on how investment money can be spent. This is based on the strategies and initiatives of the company. The goal should not be to budget down to each dollar.

For example, one company budgeted down to an employee cost of $6.52 per month per employee. The company was asked whether the cost could be estimated as a total for each department, but they claimed they needed it down to the dollar. However, budgeting at the department level and allowing a five percent variance would have had no impact on the decisions that the company made. Another important item to ask yourself is “what is an acceptable variance for an organization?” For instance, if there is a five percent variance in the revenue, then would this impact the decisions that the company will make in the coming year?

Personnel Budgeting Template

Personnel budgeting has an immense impact for organizations due to the high proportion of costs of an organization. A personnel budgeting template has similarities across all companies. There are many variables to consider, such as the type of raise, how many raises, overtime, bonuses, commissions, taxes, benefits, and IT costs to name a few. It is also important to know whether to budget by employee or by position.

Budgeting by position enables an organization to ignore employee names, terminations, and having to hire employees to replace a terminated employee. It also allows budgeting by multiple employees. As an example, a template can allow a manager to input how many accountants should be employed, what the average salary is, and what the average raise would be. If a company is budgeting by employees then each accountant should be listed. The employee’s exact salary, his/her expected raise, and all other information specific to each employee should be included as well. Budgeting by employee will be more accurate if there is little employee turnover, but it also requires more work.

Other items to keep in mind with personnel is how to allocate monthly salary, which impacts tax and benefit calculations. Allocate salary evenly by work days, by calendar days, and by pay periods. There are other ways as well. Another item to consider is separating out full-time and part-time employees, as there may be differences in the benefits that are allocated to part-time employees, such as overtime and 401k. These are all calculations that must be built into the payroll form.

Assumptions Template

A great first step is creating an assumptions template, which allows an administrator to enter data. This will impact the calculations of many templates, and it does not have to be hard-coded into the templates themselves. This data will flow from the form into all other templates. An assumptions template should include payroll tax rates, a worker’s compensation rate, and a benefit rate. The number of days in each month also matter.

The data from the assumption form will then flow into the payroll form.

There may also be a need to allocate an employee across multiple departments. In this case, there are two options: 1) Budget every employee to a “dummy” department and then allocate the salaries, taxes, and benefits in new template. 2) Upload the employee information into each department and enter the number of hours allocated to each department. This ensures there is an administrator report that checks to verify that an employee does not exceed 2,080 hours a year.

Many companies use another template called the capital expenditures template. This particular template allows users to enter capital expenditures that are projected into the coming year. This also calculates depreciation, typically on a straight-line basis. The asset type is typically chosen because each asset type has a specific life. A capital expenditures template should include asset type, department, purchase description, purchase month, purchase price, and quantity. The capital expenditures and the monthly depreciation are summarized at the bottom of the template.

More information

If you would like to get a better understanding of the budgeting templates above, you can download the free ebook here. Beyond using the right templates, it is important to have the right team and infrastructure in place to implement a successful budgeting strategy. Take the time on the front end to set budgeting goals that line up with your overarching organizational goals.

We also recommend to ask for help! By asking for help within the right channels, you can ensure the right sounding board that can guide you through the process with minimal time wasted and designed for maximum efficiency. At Solver, we have a team of experience professionals that have taken on countless projects like this one. Between the power of BI360 and their expertise, you have all you need to set yourself up for success.

Solver enables world-class decisions with BI360, a leading web-based CPM suite made up of budgeting, reporting, dashboards, and data warehousing, delivered through a web portal. Solver is reinventing CPM with its next generation solution. BI360 empowers business users with modern features including innovative use of Excel in the model design process. If you’re interested in learning more, our team is excited to hear about your organizational needs and goals.