Managing: The 5 Common Mistakes in Managing Budgets

If you are a manager then chances are that one of your responsibilities will be managing one or more budgets.  Surprisingly many managers struggle when it comes to managing budgets even though this is something that they have to do in their everyday life.  So what are the common mistakes managers make when it comes to managing budgets and how can you avoid them?

Mistake 1: Not getting involved in setting budgets

If you are going to have any chance of effectively managing a budget, it is important that you are fully involved in setting the budget.  It is all too easy to fall into the trap that your accountant will take care of it.  Trouble is they do not understand your area of the business, what drive revenues and costs and how to increase profits as well as you do.  Make sure that you are driving the budget setting process.

Mistake 2: Not acquiring the right skills

There is no need to become an expert in Finance but you need to have a good understanding of setting budgets, variance investigation and what to do if things are not going according to plan.  Many larger organisations have in-house programmes in-house on Finance for Non Financial Managers and if not there are many external short courses available.  No matter how you acquire them, make sure that you develop the right skills to manage your budgets.

Mistake 3: Not setting expectations

Managers often devolve the management of a whole budget or part of a budget to another more junior manager.  While this is excellent for growth and development, it is vital that you make it clear to them what your expectations and what you are holding them accountable for. 

Mistake 4: Relying on historical information

The Finance team will provide financial information following the end of each month.  Trouble is that it can be up to 5-6 weeks after the event when you made the decision to spend or generate revenues in a new way.  It is therefore vital to set up systems for your key income and expenditure areas that are as close to real time as possible.

Mistake 5: Not taking action quickly enough

If things are off track and you know that it is just a temporary blip then careful monitoring is what matters.  If on the other hand you know that the performance dip is not a one-off, you need to take action quickly before things get out of hand.  While this might be uncomfortable, it is much easier to tackle challenges when they are the size of a snowball rather than an avalanche.

Managing money is a key part of your role as a manager and by taking control you can become a highly effective budget manager.