Launching a second-half budget blitz

At this stage of the year, it should be clear how your company's budget is tracking and if it's not looking good, there are a few simple ways you can get back on track.

We are far enough into December to know our year to date financial results for November and to have a pretty good fix on what the first half will look like. For many businesses this won’t be pretty, and certainly not what was planned. Strange how easily that budgeted profit of 10 per cent on sales can evaporate. In combination, 5 per cent lower sales volumes, 5 per cent lower gross margins and 5 per cent higher expenses will do it. In the current climate, businesses are seeing adverse variances of this magnitude, and often much more.

The time to start thinking about how to get back on our budget track is now, not in mid-January. If you wait until then, it will be mid-February, or later, before anything happens. That’s too late. So, let’s work out now how to blitz the second half. I would like you to think of me as your business partner, or your confidante; if you like, your ‘partner in crime’. As such, I have two lists that I want you to consider – a short list of things we are not going to do, and a slightly longer one of things we are going to do. In combination, I am pretty confident they will do the job (if you embrace them fully).

First, what we are not going to do:

1. We are not going to worry or lose any sleep. The results to date are what they are. That’s reality and there’s no point fretting over them. As for sleep, I want you to adopt the Churchill mentality. If Winston Churchill could sleep soundly while bombs rained on London and invasion of his country was imminent, a few lousy numbers should not stop you sleeping. Think about it.

2. We are not going to be distracted by ‘noise’. By noise I mean several things: all the hysterical media coverage of the global economy, all the fashionable talk about pursuing goals other than making money, and all the fluffy human resources stuff about values and culture. Serious business people focus on things they can control, they understand the money-making imperative, and they know that all the ‘values’ stuff is just pointless blather.

3. We won’t look for a silver bullet. It is highly unlikely that any one thing will be the magical ‘fix’ for our budget woes, any more than one thing is responsible for good results. We will get back on track by driving relatively small improvements in a number of areas.

4. We won’t tolerate negative attitudes. To get back on track we need the energy that comes from capable people choosing positive attitudes. Yes we can! So, we are not going to tolerate poor attitudes and we will start by ensuring, every day, that our own attitude is right.

Now, what we are going to do:

1. Get back to financial basics. Only four things drive financial outcomes in any business – sales volumes, margins, overheads and assets. Just four. So we are going to ask the CFO to pull these four apart and help us understand what is going on, and where the financial levers are. And we are not going to assume we already know the answer; if we did, our numbers would look better than they do.

2. Micro-manage the numbers. With the levers in mind, we are going to construct very detailed cash flow forecasts through to June. At least weekly numbers for sales, and an accurate monthly fix on stock. Then we are going to manage the numbers in a very intensive and detailed way. We nail every number, one by one, today, this week, this month. We will literally program the business financially to be what we want it to be, then live the numbers.

3. Get the right people on the bus. We start here by getting the wrong people off the bus. There is no surer way to bad numbers than putting up with consistent non-performance and excuses. We always know, deep down, when one of our people is not up to the task. Trust your instincts and make the changes that you probably should have made a lot sooner.

4. Insist on accountabilities. From now on, performance is not discretionary. Poor performance will have serious consequences, and good performance will be rewarded. Tie the accountabilities to the numbers, but also to outstanding customer experience (moments of truth). Make accountability a consistent focus – something that the organisation excels at.

5. Ride the powerful idea. In the long-term business success depends on strategies that are informed by powerful ideas. Even in the very short-term, however, these ideas are important to results. So ask ‘are our sales and operating activities being driven right now by any big ideas?’ In sales, the big idea might be a faster rate of new product introduction, or a change in channel focus. In operations, it might involve outsourcing or shifting to new production technology. If you can’t see the big ideas at work, set about finding a couple. The quicker they are brought to bear, the quicker your results will improve.

6. And last of all, enjoy the ride. Business is a serious activity, but it is not that serious. Work should be stimulating and rewarding for you and all of your team. Make it so in the second half. The better your results, the more enjoyable it will be.

Start now to lay the foundations for a strong second half and you will be able to have a great Christmas break, knowing that you have a plan and that things are in hand.

Christopher Tipler is a Melbourne-based management advisor and author of 'Corpus RIOS – The how and what of business strategy'. His web site contains more material on this and related topics.

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