SUCCESSFUL PLANNING | Budgeting and Financial Planning

Successful planning is a mixture of paradoxes at best. First, it’s not possible to judge success until it’s history, or as Yogi Berra would say, ‘‘It ain’t over ‘til it’s over.’’ And once it’s over, we can look back and judge failure, success, or in between. Second, regardless of the circumstances, it’s not possible to go back and change what happened or didn’t happen. History might be re-written, or written differently, but if it is, then it isn’t accurate. Lastly, it’s not possible to predict the future, except in terms of probabilities, such as the typical weather forecaster might say ‘‘a 20% chance of rain,’’ or ‘‘temperatures tomorrow are going to drop into the 80s.’’ In the instant case, it’s not possible to predict or know if our planning has been successful until it’s too late to do something about it.

Successful budgeting and financial planning is one of the keys to long-term success. If your department or organization doesn’t have a plan, then make a plan to make a plan and follow through. You will feel better and improve your chances of success in doing what you want to do. If your organization has an annual business plan, then live by it and as time passes, make adjustments in your day-to-day or month-to-month work to stay on track, adjust or make up for misses, and watch for opportunities to capitalize on. At the end of the year, you can look back and say what you did well, and what needs improvement. Hopefully, along the way, one of the accomplishments was a business plan for the next year.

Once successful budgeting and financial planning has been instituted and seems to be working well for a period of 2 or more years, consideration should be given to longer range planning cycles, sometimes called strategic planning. Large, successful organizations aren’t born, they are made—not overnight—but over many nights and sometimes years. It’s also true that they didn’t get to their present state without mistakes. Sometimes those mistakes were planning mistakes; other times, they were operating mistakes.

One other important ingredient,  is a long-range strategic plan that dovetails with the annual business plan and well-oiled periodic reporting practices. This last part is no small matter; very few organizations practice it well, most are mediocre at it or simply don’t practice it at all.

Budgeting and Financial Planning

Budgeting and financial planning are not stand-alone activities. Budgeting or making a budget is the act of quantifying cost or pricing for an item or list of items, and in the case of communications, the list is likely to be a combination of goods and services. The items on the list may be a one-time occurrence or recur on some periodic basis. Financial planning is the process of striking several budgets based on alternative scenarios to arrive at a point where the budget fits within an overall set of financial parameters for the organization. The result of the budgeting and planning processes provide a financial benchmark within the overall business plan. The budget part of the business plan includes revenue, expenses, and net income, or if expenses exceed revenue, a loss, which is a big no-no. During the course of the year, the budget will be used to compare actual results of operations in current and previous periods, and to forecast results in future periods.

Organizational budgeting and financial planning for an organization typically rests within the chief financial officer function. There are two activities to be concerned with. Accounting is responsible for entering transactions into the system and periodic reporting of actual results. Successful budgeting and planning requires contribution, collaboration, and cooperation from department managers and subject matter experts as well. The communications cost management process envisions working closely with both groups. Successful communications cost management depends on a high level of consensus among all three groups, and in turn all the department managers are responsible for creating the budget and managing to success and satisfaction of management and stakeholders.

The purpose is to provide understanding and insight into creating and planning communications operating expense and capital budgets to fit within an existing accounting and financial operations system. However, significant improvement in managing communications cost  is likely to require changes in the way communications expenses are first accounted for and then budgeted in the future.

Recognize up front that changing accounting practices and processes should not to be undertaken lightly because change causes variances when current period performance is compared to previous periods. It can be seen as an inconsistent practice, which is a big flag-raiser with management, auditors, and investors. Getting past the flag requires an explanation. Be prepared up front, and then as the changes take effect and are noticed, be prepared to explain them again. Initially, most of the changes required to realize significant savings involve reclassification of expenses in the telephone expense account. This can be a natural outcome of implementing machine-based invoice validation and establishment of a standard cost system for communications.

Establishing and implementing standard cost and machine-based invoice validation so that each invoice is classified, coded, and recorded prior to being paid provides a basis for analysis, which can in turn support more accurate budgeting and financial planning in the future.

The bottom line is accounting will have to be convinced that the advantages outweigh the disadvantages before changes can be made. There is a two-part message: (1) be convinced and sure of your ground, and (2) be prepared to educate, inform, and convince your colleagues and executives there’s ‘‘gold in those hills.’’