Building a Board-Ready Business Budget – Part 1

The Critical Path: Ensure Strategic Plan Alignment

Whether you’re a seasoned financial executive or this is your first year of preparing the annual budget for approval by a Board of Directors, it’s natural for there to be some tension around presenting the business budget. If it’s a nod and rubber stamp or Directors that dissect details that you consider immaterial, sometimes you just won’t know what is going to happen. Align Your Goals It may be simplistic to state it, but you need to focus your business budget preparation on the Board’s strategic goals for the organization. It’s critical. It doesn’t matter which type of budget you prepare - rolling, static, or anything in between - ensure that the management team’s functional departments and revenue center goals are in alignment with the Board’s intent. Once the Board directives hit the door of the CFO or controller, there isn’t room for ambiguity or closed-door sessions. Establishing a clear direction for the tactical plans to achieve the Board’s goals is truly the first step toward a board budget presentation. The executive team must refine, choose, and communicate the initiatives and programs they plan to undertake before the management team can get to a granular level where everything is in sync.

‍Level Up

‍You’ve got alignment. You’ve got the details and departmental manager approvals. Next, it’s your turn; time for the financial team to get the budget ready for the next stage at the executive level. I realize that the players may all be the same in smaller companies but it’s important that the budgeting and planning process goes through different iterations whether the company has 10 people or 10,000.There’s a lot of room for error when consolidating the work of individual departments, business units, and entities. How long the process takes varies significantly between organizations depending on the complexity of your financials, the experience of the staff, and the tools that you use. Fortunately, you can influence the duration by streamlining the workflow, implementing and integrating software solutions, and utilizing evaluation methods that focus on exception management, ratio review, and what-if analysis. (I’ll be digging deeper into the review process in my next article).

‍The Full Package

‍When you prepare your budget presentation for the Board, there can’t be any gaps. The company’s operational and business leader’s input must incorporate the same elements that will be seen in your annual report.Your financial statement package - the Balance Sheet, Income Statement, and Cash Flow projection - needs to be looked holistically, rather than in the pieces. It’s your job to ensure that the documents accurately consolidate the functional departments 'and profit centers' expectations and ensure that all joint resources and allocations are treated cohesively throughout the documents. Come Full Circle As you near completion of preparing your budget for the Board, be certain to circle back to specifically review the Board’s strategic directives. During the budgeting and planning process there will be (and should be) a lot of discussion about things like potential programs to implement, whether the assumptions and timing of outside funding are conservative enough, or if all payments on the receivables reflect the contracted payment terms. A lot of information comes at you. Take time at this point to look at the overall scope of the budget and tie each initiative and major expenditure back to the Board’s goals. Expect to find differences. A major CAPEX item in the budget could put a wrench in cash the Board wanted used for R&D. Take note of it, determine if there are leasing alternatives or other options that may work, evaluate their impact, and, if you feel strongly enough in it remaining an exception, prepare to call it out when presenting to the Board.

‍Enter with Confidence

‍The process of presenting budgets to a Board can be intimidating for anyone. Over-preparing for the meeting and being confident in the accuracy of the numbers and the information they represent will go a long way in calming nerves and feeling assured that you’re ready for the Board meeting and any questions that may come your way.‍