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What is actually meant by "collaborative budgeting"

I work for a $20 million dollar services company and am wondering what would a more collaborative budgeting process look like? What do the process options actually look like in your experience? I think we are rather collaborative, budgeting involves many people, but I may be alone in this belief. My interest is partly that our Controller recently remarked that ours was the least collaborative budgeting process she'd ever been involved with. I don't get it, since I'm not descending a mountain alone with two stone budget tablets. Thank you, Edward

Answers

Topic Expert
Wayne Spivak
Title: President & CFO
Company: SBAConsulting.com
LinkedIn Profile
(President & CFO, SBAConsulting.com) |

Have you asked her? I find many times my definition is not your definition leading to miscommunication.

This is why most contracts have a definition section; it makes sure all parties understand how a term is used.

Anonymous
(CFO) |

Wayne, you have hit upon part of the problem. I am sure that she has experienced some sort of different budgeting process at other assignments in the past that she views as superior.

Sadly, she regards me as kind of an out of touch old-fogey. We don't have much trust/communication between us. I fear she would just use it as kind of a gotcha, as in "hey everybody, Edward doesn't know what collaborative budgeting is!"

Any insight you may have would be greatly appreciated.

Edward

Topic Expert
Wayne Spivak
Title: President & CFO
Company: SBAConsulting.com
LinkedIn Profile
(President & CFO, SBAConsulting.com) |

Ask the question. Do it in private or do it in public, but not to do it shows that people can't ask questions and clarify information.

So not doing so would be a disservice to you.

Anonymous
(Manager) |

I don't get it... is it some kind of actual thing or what? In my experience, budgets are always collaborations to at least some degree.

Topic Expert
Wayne Spivak
Title: President & CFO
Company: SBAConsulting.com
LinkedIn Profile
(President & CFO, SBAConsulting.com) |

Actually, not always... it depends on culture and imho, how dysfunctional ownership may be.

Sarah Jackson
Title: Associate Editor
Company: Proformative
(Associate Editor, Proformative) |

Edward, in addition to Wayne's excellent advice to talk to her, I found this white paper on the subject:

"Avoiding the Potential Pitfalls of Collaborative Budgeting:"
https://www.proformative.com/whitepapers/avoiding-potential-pitfalls-collaborative-budgeting

The middle part of page four of this white paper has a good description of a more collaborative budget process:

"Achieving Superior Financial Flexibility Through Driver-Based Budgeting and Planning"

https://www.proformative.com/whitepapers/achieving-superior-financial-flexibility-through-driver-based-budgeting-planning

Best... Sarah

Chris Shumate
Title: Accounting Manager
Company: Dominion Development Group, LLC
LinkedIn Profile
(Accounting Manager, Dominion Development Group, LLC) |

Part of a collaborative budget, at least as I see it, you would have the department managers together discussing how much cost their particular line of business cost for them to produce at the revenue being received. Then finding out how much more revenue the team could produce without adding additional cost.

Thinking back to my insurance accounting days, these numbers aren't anywhere accurate and are only for demonstrative purposes only, but if an underwriter and an underwriter's assistant could produce $1M in revenue for a particular line of business, how much more revenue would another underwriter's assistant add? Would it be $500k in additional revenue? How much would that underwriter's assistant cost the company? If it's in workers' compensation department, would it be better to add someone there, or in a general liability department?

If a company as a whole has only so much money it can spend, then finding out which part of the business is most likely to grow and benefit the most is what's helpful. To me, that's what a collaborative budgeting process is. Some other department doesn't hire until their revenue is up enough or there's a justifiable need to do so.

If you know someone in a nonprofit, especially a church, that you could ask about collaborative budgeting I believe that would be helpful. All nonprofits have to fight for their budgetary dollars and become collaborative to a large degree. Nothing much is dirtier than a church budget fight. :)

Anonymous
(Manager) |

In my experience it's often more associated with more of a bottom-up than top-down approach. To do that means loosening the grip on information and some organizations are more or less eager to get more transparent.

Chris Shumate
Title: Accounting Manager
Company: Dominion Development Group, LLC
LinkedIn Profile
(Accounting Manager, Dominion Development Group, LLC) |

Sort of like zero-based budgeting?

EMERSON GALFO
Title: CFO
Company: C-Suite Services
LinkedIn Profile
(CFO, C-Suite Services) |

To answer your question, I call it the "Sandwich" approach where the Board sets the direction/strategy and goals while management from the bottom up figures out the ways/numbers to accomplish those goals.

I don't know if I can elucidate this well enough but.......I think there needs to be a change in budgetting and general management perspective where we budget FROM THE CONSTRAINTS POINT OF VIEW. There is minimal "problem solving" and moving forward with this point of view. Set up the goals, determine the budget for those goals and SOLVE how to get the funds. Having it backwards (this is the money we have, try to accomplish the goal) is fine but as I said, minimal movement forward.

Maybe when I think or ponder on it some more I can find the right words or find how to explain it much more clearer. For now, with just half a cup of coffee, best I can do.....lol. For those that get what I am TRYING to say...a little help is appreciated...lol. (at least I already have my sense of humor with the half cup).

Gene Siciliano
Title: President
Company: Western Management Associates
LinkedIn Profile
(President, Western Management Associates) |

Good input from everyone, but maybe not as focused on the collaboration concept that Edward is trying to understand. In my experience collaboration is the involvement of every level of management in the creation of the budget, the negotiation that moves the budget from draft to final, and the involvement in successfully managing to the budget of everyone who was involved in creating it, all guided by Finance. That, to me, is collaboration with a purpose. With no intent to be self-serving, this is really well described (imho) in Chapter 12 "The Annual Budget" in the McGraw Hill book entitled Finance for Nonfinancial Managers, 2nd Edition, written by, well, me.

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