How Service Delivery Managers Can Justify Yearly Budgets

Most organizations have to create annual budgets to plan for expenditures in the upcoming year. Properly forecasting your resources is a key factor in establishing an accurate budget. If you over-forecast and request more money than you actually need, your request may be denied or you might end up with a surplus budget that might affect your future budgeting. Likewise, if you under-forecast, you might find yourself scrambling to make ends meet which could put stress on you and your team and affect your team’s productivity. Creating an annual budget should involve different levels of management to ensure their team is well-prepared for the years’ projects.

Creating an Annual Budget

Businesses need to grow annual revenue to cover yearly expenses and continuously monitor it throughout the course of the year in order to track performance. Is your earning relative to your spending? Businesses should always track how much money they’re bringing in compared to how much money they are spending, but that’s no secret!

Before creating your annual budget, there are a few important questions you should have the answers to:

What are the direct costs of sales?

This is your COGS (cost of goods sold). COGS is the direct cost attributed to the production of whatever it is you’re selling. This includes the costs of all your resources used in the production process— i.e. labor and cost of materials used.

What are your fixed costs and overheads?

Your fixed costs and overheads are the expenses your business endures in order to operate. This includes subscriptions to software or CRM systems as well as building rent/mortgage, utilities, and employee salary.

What are your projected sales?

Projected sales are also important to determine. They give you an estimation of your year’s revenue, which plays a huge role in measuring the health of your organization and establishing a budget. If your projected sales are low, you’ll need to make up the difference or you’ll develop debt.

Struggles with Budgeting

Justifying an annual budget requires more than just saying “please”. Companies’ budgets are often limited, so to build a solid case for your requested budget, there needs to be a sufficient amount of data to justify costs. The more data you can provide to show proof of relevance, the better off you will be. This data might include past profit margin growth, case studies that support expenditures, or continuously demonstrated team growth—any of these would offer a solid foundation for your budget request. Companies put a lot of merit behind indisputable data. They like to see consistent growth and recognize the need for more budget if it is undeniably justified. Your team must show proof that budgets will be utilized to their fullest potential and produce results that justify the expense.

With that, however, you must set realistic goals and timeframes for these budget requests. You cannot promise unrealistic goals just to look confident. The most confident teams know their own capacity and their own limits. Setting practical goals and timelines and attaining them is far more impressive than setting notable goals that aren’t achievable.

How Resource Forecasting Influences Budgets

Budgeting clearly outlines how you plan to spend your money in the upcoming year. Without forecasting resources and their expenses, your budget will have no legs to stand on. To make sure your budget can go the distance, be sure to:

Gain insight into managing current expenses and projecting future expenses

Your budget providers want to know how you will be managing your gifted budget. Do you have a confident understanding of your current expenses? What about your future expenses? Decision-makers want to know that you are going to utilize your budget efficiently and effectively.

Provide a clear roadmap for the year

Outlining your year financially will provide sound reasoning behind your budget request. If you are able to clearly outline your projects and forecasted revenue for the year, you will be providing a solid argument for your request.

Increase accountability of departments and team members

Forecasting resources is a tricky skill that project managers have to be good at. Knowing your team’s growth pattern and being able to accurately forecast individual growth will help when allocating projected workload for forecasted projects. When workloads are catered to the individual’s skill set, team members are empowered to pull their share.

Track forecasts vs actuals

Tracking and comparing forecasted data against actual data will help you tighten up your forecasting practices for the future. If you notice your forecasted results are close or exact to your actuals, you’re in good shape. However, if you are noticing huge differences, especially with over-forecasting, that is something you will need to address before requesting yearly budgets. You’ll want to aim for a forecast that is as close to accurate as possible.

Relationship Between Data and Budgets

Analyzing data from previous years will help organizations make better-informed decisions for the future. Using past data to forecast resources, time, and budget allows for accuracy, consistency, and accountability. Reflecting on past data can help set realistic and attainable goals and benchmarks to measure progress. Through detailed reporting, you can identify strengths and weaknesses within your team that can help build new processes, and tighten up existing processes so that they become more efficient.

For example, maybe you’re a seasonal business, like a tax accountant or landscape architect. Sure, you have business year-round, but there is a clear influx at a certain time of year, and you try to prepare for it as best you can. By identifying these influxes, you’ll be able to determine if that’s the time you will need to bring on additional team members to reallocate work.

Establishing patterns in your reporting and addressing the needed processes will help keep your workload organized for everyone on your team.

Data analysis is not only good for workload, but it can help with overhead cost reduction as well (which will benefit your budget requests!) Finding areas in which to cut costs isn’t always easy, but when you have clear reporting of resource use and allocation, you may identify areas that you can live without.

How Resource Hero can Help with Budget Justifications

Resource Hero is a simple resource management and time tracking application that helps to more accurately forecast revenue and resource expenses. Resource Hero comes with a number of helpful features that will push your team towards productivity.

Forecasting Resources: Being able to forecast accurately will play a hand in budgeting by estimating projects’ yearly profit. Forecasting can help improve issues like misaligned objectives or inappropriately allocated resources. When you can better forecast your resources, your processes will tighten up and your team will perform more efficiently.

Resource Management: The data you collect from documenting the management of your resources, most specifically your team members, is important to forecast expenses and budgets more accurately. Understanding team members’ workload and their individual ability to handle their workload capacity will help when forecasting projects.

Time Tracking: How much time is your team spending on projects? Understanding their time allocation will help forecast resources needed to complete projects and workloads. When you can better estimate profitability on projects, you can strengthen your budget requests. Knowing where your team members are spending their time is critical to many facets of your business. Without accurate time tracking metrics, you won’t be able to accurately forecast production workload or possess the insight you need to create efficient business workflows.

Creating an annual budget and justifying the needs is easy with the right tools. Having a resource management tool that delivers hard, indisputable data will not only clarify your budget needs but support them as well. Properly forecasting your resources will aid your budget request and solidify your processes, making your team more efficient and profitable.