Business Budget Ownership: Who Is Responsible & Why It Should Be Shared

One of my clients has recently grown from having 40 employees to hitting the 65 people mark. This expansion calls for a new kind of leadership structure. One of the biggest factors they need to address? Budget responsibility.

This is a common problem that business owners face when they reach a certain size. Up until this point, they could get away with holding the purse strings themselves, having complete control over their budget. Now, they need to share that budget responsibility to keep up with their growing business demands. The fear is that money will be wasted.

This fear makes total sense. Business owners know the true value of their budget and are acutely aware that if money is wasted in one part of the business, another part will suffer. Whether it’s the ability to hire new staff or afford quality ingredients or materials, wasted money can result in losing the precious resources that make their business thrive.?

There are two big questions business owners should be asking themselves.?

Who should have budget responsibility? and How do we manage the budget?

First, let’s take a look at why business owners need to share their budget responsibility in the first place and what happens when your budget allocation relies on employees asking for funds.?

What Happens When You Don’t Share Budget Responsibility

1. Good Negotiators Have More Access To Funds

Some of your employees are going to be better negotiators than others. They will know how to get you excited about a project and sell it. Other employees may have amazing, profitable ideas, but they don’t have that negotiating power. This means that your precious budget could easily go to good negotiators instead of profitable ideas.

2. Less Thought & Poor Planning

When your employees need budget approval, it’s easy to ask first and think of consequences later. If you as the business owner hold all the budget responsibility, your employees may not take it upon themselves to thoroughly vet their venture before asking you to fund it.?

They simply think, because you have given them the go-ahead, that it must be worthwhile. If it turns out to not be a great return on investment, that fault is on you, not them.

3. Popular Investments Get More Funding

As a business owner, you can’t be an expert in every aspect of your business. That’s why you hire professionals in different departments. When they need to ask you for funding, it’s easy to say yes to the departments you understand the most.?

This is perfectly natural as it’s an investment you are familiar with and you can see the potential profit. In reality, one of the departments you are less familiar with could yield a higher return on investment with that money.?

4. Discontent Within Your Organisation

When money isn’t being allocated in the right way, it can easily lead to an unhappy workforce. Though you may not purposefully be favouring specific departments or employees, unfair money distribution can cause a rift within your organisation. This can result in employees leaving, or two camps being created within your business - those who have access to funds and those who don’t.

How To Effectively Share Budget Responsibility

The first step is to create processes that allow your people to budget and estimate their spending based on their targets. These budget estimates or project proposals can then be pre-approved every six months or every quarter; however tightly you want to manage it.?

Based on those reports, your people can objectively assess their budget and be responsible for it. They aren’t simply asking you for an investment and doing the work, unbothered by the end result. Instead, they need to show you the return on investment, factoring that into their initial planning.?

This model gives your employees full autonomy over their department. You put these leaders in place because you trust them to grow and scale your business. By giving them this extra layer of responsibility, they can set their own goals, project-manage them, and invest where they need to invest.

The most important step here is to measure the outcome.?

By stipulating to your leaders the return on investment you expect, you can then easily see at the end of the project if they have succeeded or fallen short. These clear metrics will teach your employees how to be savvy and get the highest return on investment possible in the future.?

The best thing about this approach is that it takes the responsibility off your shoulders to some extent. Instead of coming to you with just an idea and asking for money, your employees must now deliver an entire plan with proof of tangible results.?

From there, you can set up layers of approval. For example, you could choose to personally approve every proposal, or just review the proposals that are requesting a certain amount of money.?

Reviewing how your people are intending to spend money ensures that they satisfy certain guidelines and will bring in a worthwhile return on investment. You can even add in a risk factor for certain departments or projects where it’s difficult to predict the outcome.

The more objective you can make this entire process the better. It will:

• Teach your people how to effectively budget within the business.
• Create transparency around how money can be accessed.
• Dictate clear expectations tied to their performance and growth.
• Give your people the chance to get savvy with the budget and understand how to make the smartest investment choices possible.
• Entice your people to regularly check over their budget and trim fat in the form of unused subscriptions etc. that are so easily missed.

Handing this responsibility of sharing the budget to your leaders is good for the entire business. It helps your departments direct funds to where they will be most profitable, giving you peace of mind by teaching your employees to think about the budget the way you do.

Is now a good time to see what budget related processes could do with a bit of tweaking to dial up ownership? Press play now to watch the full video on my YouTube Channel - Scale Your Tech Business With Nina.

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