top of page

Everything you need to know about Departmental Budgeting


Departmental Budgeting


Departmental Budgeting can be a great way to build a bottoms up forecast that is both accurate, and defensible


But the process can be tough, especially if it’s your first time


First…


➡️ What is Departmental Budgeting?


Departmental Budgeting is the process of preparing a budget with the help of Department Heads


➡️ When Should You Prepare a Departmental Budget?


The answer can vary based off of a number of factors, such as


⚫ Company Size

⚫ Number of Departments

⚫ Level of Transparency Available to Each Department Head

⚫ Systems & Tools in Place for Tracking & Forecasting


The general idea is that Departmental Budgeting is something that companies start to think about as they grow to a larger number of hires


➡️ How Do You Prepare a Departmental Budget?


1️⃣ Start by Understanding the Existing Structure of your Data


Do you have your chart of accounts set up so that each department has it’s own section?

OR

Do you utilize a class feature, allowing you to drill into an added dimension to see departmental figures?


2️⃣ Outline Who will do What


Once it’s clear how your data is being tracked, make a list of each of your department heads


❔ Who will be responsible for each department?

❔ What information will they have access to?

❔ What is their level of knowledge with Finance & Accounting?


3️⃣ Export your Existing GL Account Information


It’s important to provide any information on what is currently happening in their department, as much of this activity will most likely shape the projected spend


4️⃣ Prepare intake forms


Once the Department Heads have insight into what is CURRENTLY happening, they can then enter in the details around what they are PLANNING to happen


5️⃣ Forecast your Headcount by Department


In addition to reviewing the information shown on your General Ledger, you’ll want to showcase who is currently in their department, and all of the associated details with each hire


Once you have all of this information collected, you can combine each intake form into your Financial Model


It’s important to remember that Department heads most likely don't have a strong Finance & Accounting background, so they may need your assistance in completing this process


Once you are finished - don’t stop there!


Provide ongoing reporting to ensure that the company continues to stay aligned on it’s plan, and it’s progress against that plan


These are my suggestions from my experience preparing Departmental Budgets - what would you add?

56 views

Related Posts

See All
bottom of page