To state the obvious: budgeting is complex.
Budgeting for strategic initiatives or accounting for special projects makes it even more so.
Sometimes you want your department heads to submit their own initiatives and other times you want to dictate to departments which initiatives they need to budget for. But either way – you always want to get the best thinking from employees and staff. If they have ideas for a program to support a strategic objective, or a good idea that increases revenue, reduces expense, or provides meaningful impact to the organization, you want to be able to capture that outside of your ‘operational budget.’
These initiatives may be departmental specific. In other words, they may only touch the department submitting the budget and no other department in the organization. They will probably touch multiple accounts within the account structure. For example, the proposed initiative may require expenditures in consulting fees, the travel account, and in legal fees. Or these initiatives may be organization-wide and touch multiple departments such as new software implementation, a new product campaign, or graduation costs.
How can we effectively manage budgeting for strategic initiatives?
This is a problem that has plagued organizations and budgeting applications forever. Budgeting for strategic initiatives requires special functionality that allows for:
- flexibility in how a department head makes these requests
- proper documentation to justify these requests
- top-down control to assign specific initiatives to multiple departments
- ability to categorize the initiatives by predetermined groupings
- a workflow that allows for approval of the requests
- reporting and analysis to understand the isolated costs as well as the full impact organization-wide
- unique functionality that allows management to see, and approve or disapprove each initiative
- Plus, if the individual request is not approved, the budget system needs to be smart enough to remove all of the associated costs.
Budgeting needs to be elevated to be part of a strategic conversation. If department heads understand your organization’s strategic plan and objectives before creating a budget, they can more easily budget to them and communicate how each line in their budget will achieve a strategic objective.
Budgeting for strategic initiatives can increase employee innovation and ownership by giving them a voice. Having the right functionality woven into your budget process is a must-have for this to work properly. Budgets that foster collaboration, visibility and accountability position organizations to move forward in a united direction and promote positive growth.
For more best practices on budgeting to strategy, download the Business Officer Magazine article that explores the process and culture changes needed to synchronize budgetary decisions with the strategic plan.
