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Why Collaborative Budgeting is important during WFH/hybrid work

Whether you refer to it as “decentralized”, “distributed”, or “collaborative”, engaging multiple participants in the budgeting process can be a challenge, especially during today’s WFH/hybrid environment.

Department heads are often not experienced in mainstream business practices like budgeting, forecasting and management reporting. Yet, engaging these individuals and gaining their expertise and insight during the budgeting process is critical for an accurate budget and the financial prosperity needed to fund the institution’s mission.

The 5 keys to success for decentralized or multi-participant budgeting are based on best practices – both in our experience and what we have learned from our customers.

 Key #1- Ensure two-way communication.

Easier said than done of course. It’s just not realistic for the finance department to have 100 one-on-one conversations with budget managers before, during and after the budgeting process.  The key is to elevate budgeting to be part of a strategic conversation. If budget managers understand their 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.

Also you need insight into the process at every step along the way. With proper transparency you can  identify those who are having problems and actually need one on-one intervention.

Key #2-Capture the rationale behind the data.

Multi-participant budgeting works best when budget managers are able to document their assumptions and defend the rationale behind their requests.  When budget managers include justification for line items and projects, it helps the you in the finance team make informed decisions about what to fund and what to cut.

Another benefit of documentation, and carrying historic data over from year to year, is that it gives new hires a convenient way to understand past and current budget expectations, which makes turnover transitions much smoother.

Key #3-Keep participants engaged: Rule #1 and Rule #2 actually improve employee engagement in the budgeting process.

Employee engagement is the emotional commitment the employee has to the organization and its goals…Engaged employees lead to better business outcomes. In fact, according to Towers Perrin research, companies with engaged workers have 6% higher net profit margins, and, according to Kenexa research, engaged companies have five times higher shareholder returns over five years.”

With multi-participant budgeting, the higher the level of engagement, the smoother the process will go. Engaged budget holders are more in tune with organizational goals and are more willing to do the (sometimes really hard) work of creating an honest budget. And the more honest each participant’s budget is, the more reliable the final rollup will be.

Further, they feel more ownership of the final numbers when the process is collaborative and are have the opportunity to justify their decisions – even if, in the end, their final numbers are cut.

Elements like communication, ownership, collaboration, and ease-of-use can all serve to engage budget managers in the process.

Key #4-Take “complicated” out of the budgeting equation.

Most non-financial people don’t like using spreadsheets. Most financial people do. So, in order to get buy-in, it makes sense to employ a budgeting solution that keeps every user in their comfort zone. We’ve all come to expect ease-of-use from today’s technology. But for most organizations, budgeting sits in the dark ages of homegrown spreadsheets: difficult for non-finance folks and prone to user error – and there is a lot of the time and energy required to manage the numerous spreadsheets of multi-participatory budgeting.

Ease of use is a important key to high user adoption. What works are Cloud-based budgeting solutions, which offer the convenience of anytime, anywhere utilization. Self-service reporting. A guided step-by-step interface that makes data entry and analysis simple enough for end-users but robust enough for finance’s needs.

If it’s too complicated to learn or the finance team can’t self-service the maintenance of their own system, it really doesn’t work. And if the budget manger can’t use it, the final solution won’t work for anyone.

Key #5: Build in control and flexibility.

We’ve all heard of top-down versus bottom-up budgeting. The truth is that organizations with multiple participants need a balance of both styles, including the right mix of financial controls for accuracy and flexibility. Ideally, control of the budgeting process will flow both directions: with budget managers having the flexibility to choose the budgeting method (or methods) that work best for them, whether that is simply spreading an expense based on historical trends or managing each line item individually…and finance administrators need the control to lock down key aspects of the budget process such as assigning custom target budgets, setting key drivers or benefit expenses.


These are the keys to keep in mind any time you have multiple participants in the process and want your budgeting process to be collaborative. This is especially important with today’s combination of work-from-home, in-office, and hybrid team members.

To read more about engaging multiple participants in the budgeting process, read the article Making Multiple Participant Budgeting Work.


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