Budgeting is a topic that isn’t very popular in many companies, and it can be a time-consuming project for many employees. A tip is to not make complicated templates as the goal is an estimate for the coming year. If employees can’t have small variances, then they will make choices that only impact their results against the budget and not what is in the best long-term interest of the company.
The goal of a budget should be to give an approximate estimate of how the organization will do in the coming year and to provide details on how money can be spent, which should be based on the strategies and initiatives of the organization. The goal should not be to budget down to each dollar. For instance, one company budgeted down to an employee cost of $6.52 per month per employee. The company was asked whether the cost could be estimated as a total for each department, but they claimed they needed it down to the dollar; however, budgeting at the department level and allowing a five percent variance would have had no impact on the decisions that the company made. Another important item to ask yourself is “what is an acceptable variance for an organization?” For example, if there is a five percent variance in the revenue, then would this impact the decisions that the company will make in the coming year?
Personnel budgeting has a large impact for companies due to the high proportion of costs of a company. A personnel budgeting template has similarities across all organizations. There are various variables to consider, such as the type of raise, number of raises, overtime, bonuses, commissions, taxes, benefits, and IT costs to name a few. It is also good to keep in mind whether to budget by employee or by position.
Budgeting by position allows an organization to ignore employee titles, terminations, and having to hire employees to replace a terminated employee. It also enables budgeting by multiple employees. As an example, a template can allow a manager to input how many accountants should be employed, what the average salary is, and what the average raise would be. When budgeting by employees, then each accountant should be listed, the employee’s exact salary, each person’s expected raise, and all other information specific to each employee. Budgeting by employee will be more accurate if there is little employee turnover, but it also requires more work. Another item to consider is separating out full-time and part-time employees, as there may be differences in the benefits that are allocated to part-time employees, such as overtime and 401k. These are all calculations that must be created into the payroll form.
A great way to start is to create an assumptions template, which allows an administrator to enter data that will impact the calculations of many templates and therefore does not have to be hardcoded into the templates themselves. This data will flow from the form into all other templates. An assumptions template should include payroll tax rates, worker’s compensation rate, benefit rate (for health, dental, and vision), and the number of days in each month, which is used for accurate monthly allocation.
If you want to learn more about budget templates,