Throughout this Budget Management Series I have discussed how central Managers are to Budgets and the Budget Process. Managers run programs, manage operations, are integral to planning and ultimately set the direction of most strategic thinking. The budget process can be the common thread to link all these manager functions.
Budgets can provide managers a unique platform to communicate in a three dimensional format simultaneously.
Dimension One – budgets provide a self-monitoring platform for individual managers. Integrated properly, managers can use budgets to track their progress against their budgeted expectations, roll-out projections based on current information available on a real-time basis and model what-if scenarios to track what their projects and/or cost centers would look like if they made changes on the fly. All this real-time information is very enlightening to a manager and will help them to better manage resources and enhance their decision making abilities.
Dimension Two – budgets provide the perfect inter-connective tool for managers to share financial information between managers. Budgets allow managers to monitor their own projects and/or departments they are responsible for directly. If the managers become individually comfortable with their own budgets and monitoring financial progress, it will be a natural extension for them to share this information openly with other managers. There is always somewhat of a push-pull effect when it comes to balancing the goals of an individual manager with the goals of the organization as a whole. The downside of the push-pull effect can be minimized through the budget monitoring process where managers can both share and view openly the effect of their progress as compared to budgets and projections side-by-side with the combined effect of other mangers which will allow a look at the whole organization and still not take away from the results of their individual efforts.
Dimension Three – finally budgets provide a window for people outside the manager group to peer into the financial inter-workings of the organization allowing them the ability to both monitor and gain an understanding of how work is progressing as the year plays out. The people I am referring to can cover a broad range everyone from lower level staff through senior management (CEO, CFO, COO) through the Board of Directors to individual officers like the President of the Board and Treasurer.
There are not too many financial tools out there that can fill three purposes at once as an effective working budget and projection system. I would argue that the system itself can, at some level, be self monitoring if the reports are made fully available to all constituents and they are inherently understandable. That is they tell the story openly and honestly and with full transparency. Thus Managers can talk to Managers through the Budget System and they will.
This concludes my six-part series on Budgeting and the Non-Financial Manager. Next, I will discuss other topics related to finance and governance and look at the impact the new 990 form is having on nonprofit organizations.