We’ve written about this before, but it bears repeating
Most people in business when they think of the budget/forecast (there is a difference, but most people use the term interchangeably, so we won’t get technical) they think CFO or Controller as the responsible party.
Most people would be wrong!
While the CFO has responsibility for the budget, that person for the most part acts as the Project Manager, and subject matter expert (SME), and to a lesser extent a participant in the number creation.
Why? Your company, be it a start-up or large cap, has SME’s who are better situated to make those decisions. The sales department should have an idea as to what products should be selling and the quantities (how else does the purchasing department know what to buy?) The products are the province of the marketing department.
And where does the sales department get their figures, by researching the marketplace. Talking with current customers (especially on the wholesale level) and using historical data as a comparison. In addition, each department, under guidance issued by the CFO and/or CEO will need to determine staffing, and payroll costs, along with the overhead to do business.
Just like sales and marketing, the shipping/warehouse needs to make a budget along with an average cost to ship the average package. These variable costs determine MMU among other KPI’s (key performance indicators).
The process (simplified)
At the end of each fiscal year, the managers of all the departments should start the budgeting process for the next year, at least. The nearer the time frame the more accurate the budget should be, as the landscape that the business is in, can be accurately determined. The farther out, the fuzzy the crystal balls forecast.
One of the reasons for rolling forecasts is just that reason, because each month or quarter is now clearer than it had been the month or quarter before. Adjustment to fine tune the budget becomes extremely important for cash flow, lenders, investors, and the business itself.
Each sub-budget is then reviewed by the CFO and suggested corrections are sent back to the managers. Once the CFO is satisfied, the C-Suite reviews to see if everyone is comfortable with the projections, and its implications. The final call comes from the CEO, who depending on the size and structure of your company will present it to the Board of Directors (or the Boards Budget committee) for their approval.
The Board can send the budget back due to a plan that is not achieving the results they feel are appropriate.
So, the next time someone says it’s the CFO’s job, you’ll know better, it’s everyone’s responsibility. From the bottom all the way up to the top.
Need help budgeting, SBA * Consulting can help.