Budgeting can be fun! The annual budget process is a great time to review what happened in the year just past and your expectations for the coming year. What is your business story? Did a new product launch go viral? A major grant not renew? And what about the larger economy? Did it boom or nosedive and how does that affect your organization? What major themes emerge? Imagine how your story unfolds in the coming year.
A budget is a financial version of your business story. You are translating the narrative into financial accounts. Grant not renewing = less revenue. Product going viral = more revenue. Staffing needs become line items creating “Total wages & benefits”.
In Zero Based Budgeting, every line item in your budget narrative is reviewed and questioned. Even those set in stone are given a second think. How is this line item affected by our business story this year? Are we taking all factors into account? Are we being innovative?
For example, most organizations sign a five or ten year lease. During the annual budget process, all they do is update the rent for the coming year. But do you still need all that space? Are more people telecommuting? Did Project B downsize its programming staff? Most people think “The lease can’t be changed” and move on. But could you sublet a section to a small start-up for a year or two? Did you speak with the building manager about your overcapacity? Might turn out the tenant next door is dying to expand.
Inversely, another important question is are you spending *enough* in certain categories? Does your staff travel enough? Should you increase your marketing budget? Does your IT system always break down, costing staff hours of wasted time?
An equally important task in zero-based budgeting is reviewing staff levels and capacity. Have your needs changed as sales and projects shift? By identifying areas of over and under-staffing ahead of time, a worker’s departure becomes an opportunity to realign. Instead of dusting off the same old job description, create a new one to serve current needs.
With Zero Based Budgeting, you can spring clean your business operations each year, preventing dust from accumulating and gumming up the works. It takes more time but it is worth it!