We all know how much the word Budget gives us butterflies in our stomachs, normally the end of the year is the time when we have to stop everything we are doing to start understanding what we spend, list what we are not going to spend and with this information start spending planning for the following year. And the best, all for yesterday…
A major barrier in developing an assertive Budget is controlling what we spent during the past few months, where we exceeded what was planned and where we have money saved for not having spent as we planned. This control is one of the main activities of the Legal Ops team.
With the observation of this arduous activity in some companies we were able to notice a pattern of work and also of common problems faced, to avoid the arduous path of this activity. Six points of attention, are as followed:
MAKE THE BUDGET TOGETHER WITH THE AREA
More than planning the budget of the area/team, it is necessary to involve them in the activity, explaining concepts that are clear to those who are not in the day to day of the activity can seem complicated, but it helps a lot in validation and promotes the expansion of knowledge. Provision calculations, partners, projects must be clear both in their methodology and in the form of control.
KEEP VERSION HISTORY
Changes in the calculation model, final numbers, alignments with areas must be stored in history, keep in mind that the Legal Ops department only supports teams regarding the calculation model, but all particularities, deviations and exceptions must be stored in case of future inquiries.
CONFRONTING THE BUDGET WITH THE CURRENT AND ALSO WITH THE FORECAST
A great way to guide the budget is confronted with your past and current months, this to understand if the deviations are in accordance with the reality that happens or in line with expected movements, the past always helps to explain the present and also the future
USE THE AREA AS A DEFENSE PARTNER
Okay, we have the budget ready and validate it internally, now we have the difficult task of approving this budget with the company's planning and control team. The Legal Ops team must work in partnership with the defense areas, no one has more knowledge and property to want the budget than the area that validated it.
DON'T ASK FOR MORE THAN YOU NEED, BUT IF YOU NEED MORE... ASK
A big mistake that we find in the most diverse departments and also in almost all business sectors is the culture of reserve of values, you know? That fat, as we commonly call it.
We do not recommend this tactic, we believe that if you are sure of the calculation of values and aligned with the areas in the business, it will be easy to defend your request for approval.
Asking more and not spending negatively exposes the area, as well as failing to ask and recognizing budget overruns.
ENCOURAGE THE MONTHLY CONTROL OF VALUES
More than having the budget validated, it is important to have a monthly control over the deviations to greater or lesser, so that adjustments can be made in Forecast mirroring more closely the reality of the operation.
Pointing out deviations to the planning team is essential for the company to be prepared for impacts or savings.
As we started, Budget is not an easy task, but it can become more interesting if shared with the areas.