This week, one of our assignments was to conduct a budgeting interview with a leader who is responsible for budgeting outside of healthcare. I interviewed Evelyn M., my friend who works at a pretty small, local software company (which I can't remember the name of right now).
Q: What information and data do you look at to create a budget?
A: I always look at our anticipated costs and expenses, including anticipated marketing costs. I also especially like to look at a projection of income based on our prior years.
Q: When needing to make budget cuts, what are the first things you look to cut out?
A: When I am looking at cutting our budget, I like to look at expenses that aren't necessary, or "luxury" expenses, such as items for the breakroom. I also look at where we can cut down hours in each department, and will start offering voluntary time off. Some employees are more than willing to take a little time off. It's also good to examine where we can cut marketing expenses around the holidays.
Q: Do you try to cut more than needed to compensate for overspending?
A: Yes.
Q: When do you decide it's time to resort to laying someone off due to budget cuts?
A: Occasionally we have an employee who ends up costing us more than they make or compensate for, and that's just not a sustainable situation, unfortunately. I, personally, dislike laying people off and it is one of my last resorts. We tend to run very lean on our staffing ratios anyway.
Q: Do you prefer to have a finance team look at the numbers?
A: No, we are a very small staffed organization, so there isn't really a need for it. Sure it would be nice, but it's just as easy to use the people we already have employed for other things, and it saves us money to not have an entire finance department.
Q: Do you do continuous budgeting or do you just look at the budget at the end of the year?
A: No, I definitely prefer continuous budgeting. It's much easier to stay on budget if you're evaluating it more often than yearly. I do monthly, quarterly, and yearly budgets, as well as looking at profit and loss, among other things, when looking at my budgets.
Q: Do you only prepare one budget scenario or do you have multiple in case things go better or worse than planned?
A: Multiple. Never strand yourself without a few backup plans.
Q: If you do not use your entire year budget, do you roll that money over into the next year's budget?
A: Yes.
Q: Who has the final say on the budget?
A: The owner of the company always has the final say. Their investment, their money.
Q: If you go over budget, where does that money come from?
A: We run our budget through an account that has credit terms extended to us, so if we go over in budget, we are running on credit rather than nothing. We will try to run promotions that have been popular in the past and bust through some product sales to make up for it.
XXXXX
This interview was interesting for me to do. Budgeting isn't really something I've ever considered before. Obviously I know that companies have to make budgets, but beyond that, I didn't think about it too seriously. I also suck at budgeting in my personal life, so it's a really scary thought to me to be in charge of budgeting an entire company.
After watching the budgeting lectures last week and doing the interview this week, I do feel like I understand budgeting better. I still wouldn't be comfortable making or reviewing a budget for a company, but I think that there's a lot of things I've learned that I could incorporate into my personal life. For example, cutting out "luxury" expenses. Obviously, there are bills and other things that would have to be budgeted, but things like eating out, buying jewelry and shoes I don't need, are luxury expenses and could easily be cut out in order to save money and actually stick to a budget.
I definitely think budgeting is important and I'm glad that we had a lesson about it. The last time I had any sort of class or education on finances was a financial literacy class in high school, and I'm not sure I learned anything then.
Q: What information and data do you look at to create a budget?
A: I always look at our anticipated costs and expenses, including anticipated marketing costs. I also especially like to look at a projection of income based on our prior years.
Q: When needing to make budget cuts, what are the first things you look to cut out?
A: When I am looking at cutting our budget, I like to look at expenses that aren't necessary, or "luxury" expenses, such as items for the breakroom. I also look at where we can cut down hours in each department, and will start offering voluntary time off. Some employees are more than willing to take a little time off. It's also good to examine where we can cut marketing expenses around the holidays.
Q: Do you try to cut more than needed to compensate for overspending?
A: Yes.
Q: When do you decide it's time to resort to laying someone off due to budget cuts?
A: Occasionally we have an employee who ends up costing us more than they make or compensate for, and that's just not a sustainable situation, unfortunately. I, personally, dislike laying people off and it is one of my last resorts. We tend to run very lean on our staffing ratios anyway.
Q: Do you prefer to have a finance team look at the numbers?
A: No, we are a very small staffed organization, so there isn't really a need for it. Sure it would be nice, but it's just as easy to use the people we already have employed for other things, and it saves us money to not have an entire finance department.
Q: Do you do continuous budgeting or do you just look at the budget at the end of the year?
A: No, I definitely prefer continuous budgeting. It's much easier to stay on budget if you're evaluating it more often than yearly. I do monthly, quarterly, and yearly budgets, as well as looking at profit and loss, among other things, when looking at my budgets.
Q: Do you only prepare one budget scenario or do you have multiple in case things go better or worse than planned?
A: Multiple. Never strand yourself without a few backup plans.
Q: If you do not use your entire year budget, do you roll that money over into the next year's budget?
A: Yes.
Q: Who has the final say on the budget?
A: The owner of the company always has the final say. Their investment, their money.
Q: If you go over budget, where does that money come from?
A: We run our budget through an account that has credit terms extended to us, so if we go over in budget, we are running on credit rather than nothing. We will try to run promotions that have been popular in the past and bust through some product sales to make up for it.
This interview was interesting for me to do. Budgeting isn't really something I've ever considered before. Obviously I know that companies have to make budgets, but beyond that, I didn't think about it too seriously. I also suck at budgeting in my personal life, so it's a really scary thought to me to be in charge of budgeting an entire company.
After watching the budgeting lectures last week and doing the interview this week, I do feel like I understand budgeting better. I still wouldn't be comfortable making or reviewing a budget for a company, but I think that there's a lot of things I've learned that I could incorporate into my personal life. For example, cutting out "luxury" expenses. Obviously, there are bills and other things that would have to be budgeted, but things like eating out, buying jewelry and shoes I don't need, are luxury expenses and could easily be cut out in order to save money and actually stick to a budget.
I definitely think budgeting is important and I'm glad that we had a lesson about it. The last time I had any sort of class or education on finances was a financial literacy class in high school, and I'm not sure I learned anything then.
Comments
Post a Comment