Make Your Financial Budget Fluid

After reading that title I know a few readers thought, "My budget is very fluid; it's going right down the drain." That's not exactly the fluidity I am talking about. See if this sounds familiar…

It's November and you are meeting with your board of directors to finalize and approve a budget for the coming year, and some board members want to get in line item discussions, some board members just want to get the meeting over with and some executives pad the budget knowing the board is going to want to trim every budget presented.

It's a game played out in businesses all over the country. And, the time for such games has passed.

Budgeting in the 70's was a relatively new tool for businesses not in the Fortune 500. In the late 80's budget review became a way to cut labor in downsizing efforts. In the 90's prosperity swelled budgets and executive compensation. A once a year budget review was considered often enough since the meetings were often contentious.

The new economy we are currently in moves at a faster pace than ever before and dramatic changes can happen at previously unheard of speed. The best businesses are keeping budgets very fluid. If marketing needs to invest in new technology in July to stay competitive but this was an unforeseen expense the previous November, the company must take the needed action. Seriously, what are you going to do, sit there watching your company lose market share because to spend the needed funds "wasn't in the budget" and just throw up your hands?

You'd be amazed at the hundreds if not thousands of companies that are doing just that right now.

Get in the Game

A budget did not come down from Mt. Sinai carved in stone, yet it gets treated as such. A budget is a guide line for the executives to project expenses based on the business conditions at the time of the budget creation. (Well, it should be.) But, most organization do not do industry projections for the coming year and then determine the budget necessary to be competitive and grow. They just tweak the budget from the year prior.

Do your research on what is coming in the next 12 months, and budget accordingly with the expectation that significant adjustments will be made as the year progresses as the climate dictates. You have to be in the game to know how to be proactive and use your financial resources to win.

Trust in the Decision Maker

If the board of directors can't trust the executives to make the proper financial decisions on the run as the year progresses, one of two things must happen. Either the board needs changed because they don't understand they are not a micro-managing entity, or the executive needs to be changed because he or she can't be trusted to make the right decisions.

The executive needs to have the controls of his organization. He also needs to be focused and willing to make potentially career-risking decisions for the good of the company. Those decisions often deal with financial resources put at risk through investments, research, a new direction or a marketing campaign that has never been tried before. Without a fluid budget, those decisions can't be made on the fly, and at the pace of today's business world, if you don't take action swiftly, the opportunity is gone.