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Budgetspeak.

BUDGETSPEAK

THE WORDS TO AN OLD SONG SAY THAT LOVE makes the world go round. As any business manager knows, this is not entirely true. If it has not been approved in the budget cycle, the world isn't going to spin.

The security professional's world has undergone a period of change over the last decade. At one time the head of a security department was the chief, and the skills he or she needed were basically those related to on-the-street police work. Those days are gone forever. Today, the head of a security department is the security manager with the emphasis on manager.

Any business manager knows that the foundation for every operational detail, employee, facility, or piece of equipment he or she manages is the budget. Resource management is the key ingredient in today's business world. Those resources are always limited, and their availability is dictated by the budget.

In managing these resources, a company's general manager is determined to minimize expenses, reduce losses, and maximize profits. If you as the security manager are not astute enough in participating in the company's budget process, you will find that your department will not get its share of limited resources and will be the target of reductions. In short, if you ignore basic business principles and fail to prove the value of security to the company's bottom line, your department is always going to take a back seat to the other departments competing for a slice of the budget.

The first thing you as the security manager will want to do is find out exactly who controls the flow of money in your company. If you do not know who holds the purse strings, y ou cannot devise a strategy for getting your department a cut of the budget cake. Expressing a desire to learn how to manage the company's assets better should be seen favorably by senior management, and showing interest in the budget process will endear you to the resource management people.

Once you learn who manages the budget system, go to him or her and ask for an explanation of the process. If you do not have direct input in the process, find out who does, and let him or her know you would like to participate.

Prepare a well-thought-out explanation of the benefits your input can offer. Merely saying that you want to be involved may not be enough. You must show you can analyze requirements, plan a budget, and justify your bottom line.

In George Orwell's book 1984 the fictional government created its own language -- Newspeak. If you did not talk the language, you were suspect. This is not a fiction where budgets are concerned.

The bean counters and number crunchers have their own language; you might say they talk Budgetspeak. If you cannot talk their language, you are suspect, and you will probably be ignored when the budget is divided.

One of the best ways to learn the language is to show an interest in what the resource management people do. Simply showing interest may unleash a torrent of information from them. You may find yourself inundated with incomprehensible concepts and strange phrases but do not be discouraged. By attacking each segment of the process individually and in practical terms, you will eventually understand your company's budget process.

One of the most fundamental ways to show an interest and see the practical application of budgeting is to find out what budget reports are available. You may be amazed at the information available concerning your own department's resources and expenditures. Once you have the accounting department on your side, you may be able to receive customized reports showing how your department costs or saves the company money.

Understanding how your department fits in the overall company budget is basic to getting your department's fair share of the resources. Along the way you will find that the language and processes make sense.

ONCE YOU UNDERSTAND YOUR company's budget process, you can plan accordingly. Every company's system is different, but some principles are common to any budget process. These principles include preparing plants, setting goals and objectives, and allocating expenses for specific resources. Use these principles within the scope of your own department's situation, or lacking a unified budget process, use them to manage better. This will prove to management that you are concerned about managing the resources entrusted to you.

Annual plans. You must have a plan. At the very least, you have to plan for the upcoming year, but it is better to plan further in advance. Having a detailed one-year plan and a more general five-year plan will provide a basis for effective fiscal management.

These plans must be dynamic. They must continue to grow each year, with the next year's plan becoming more specific while the long-range plan projects future departmental requirements. These two planning processes, the one- and five-year plans, complement each other and result in a continuous process of shifting from one planning cycle into the next and back again as shown in the accompanying chart.

Plans by themselves are nothing; the planning process, however, is everything. Through the planning exercise you will develop basic operating principles and expand goals. You will develop contacts and information sources, and, most importantly, you will develop the ability to organize and plan. Once you have mastered the art of planning, you can quickly respond to any changes affecting your department, whether they concern your budget or any other aspect of your operation.

Goals and objectives. Just as the annual plan is the foundation for your budget request, goals and objectives are the foundation for your annual plans. You must establish just what you intend to accomplish, what resources are required, and when you will need them. These goals and objectives must be realistic and coincide with the company's but should have more detail on how you will implement the company's plans.

Credibility is important in having budgets approved. Attempting to justify a $10,000 expense to protect $5,000 worth of property is a fine example of how to lose credibility unless that $5,000 asset is truly critical to the operation of the company. Your rationale for expenses must be sound, specific, and detailed. Trying to put one over on the finance people will seldom work and can cost your department its most valuable asset -- its reputation for professionalism.

Resources. Once you have established your goals and objectives, you must develop a specific rationale concerning resources -- people, material, and equipment -- required to reach these goals. You cannot be too specific in explaining why you need a given resource.

In developing your budget rationale, you may want to explain the impacts caused by receiving less than or none of your requested budget. Remember: No matter how well you play the game you will seldom get all the resources you ask for. The term budget implies that planning has taken place to reach a balance among immediate requirements, expenses, and long-term goals.

You should explain in your rationale what you can accomplish with different levels of resources. It boils down to how much can you do with X dollars. You may not be able to achieve all your goals immediately, but with planning and persistence you will complete the smaller steps leading to the larger goal.

One of the major resource requirements is the human resource -- people. This is particularly true if you support a guard force. In budgeting human resources, it is critical to understand the right language and rationale. When developing personnel requirements, you should provide the staff hours required in both regular time and overtime.

You must determine man-year equivalents and understand the difference between long-term man-year requirements and short-term head-count requirements. They may differ significantly. The impact of training and special premium pay situations such as worked holidays should not be overlooked.

One area that is hard to predict but must not be overlooked is travel expense. You must examine your goals and objectives to ensure you have budgeted the necessary travel to support company neds and your own departmental goals. If you want to send personnel to seminars or other training, you must foresee the need and justify the expense. Too frequently this item is a small part of the budget, but it clearly has high visibility.

Determining the staffing level per requirement (SLPR) can be found by using the most basic formula in personnel budget planning. If PR is personnel required, HPD is hours per day, DPY is days per year, and APH is available productive hours, then PR X HPD X DPY/APH = SLPR

The rationale behind this formula is basic but detailed enough to warrant further research.

"How to Find 1/10th of an Employee," an article in the August 1987 issue of Security Management, explains the planning of personnel budgets in depth. You must understand the minimum personnel requirements necessary to account for productive and nonproductive time. People are your most valuable and most expensive resource.

Budgeting material and equipment costs, or more importantly justifying them, requires an understanding of long-range impacts. The initial expense of a large piece of equipment will draw senior management's attention and lead to close scrutiny, while similar personnel expenses will often go unrecognized. This paradox should not be overlooked. If you can show the cost of personnel required to compensate for not purchasing hardware, you may convince senior management of the soundness of your request. Clearly demonstrate the payback if some hardware is to replace personnel.

Be prepared to rationalize the need for the equipment in precise detail. Include details concerning the costs of operation and maintenance and the possible impact on other elements of the company. These details should include any necessary training time, supplies, projected repair costs, and eventual replacement costs.

Predicting material costs can be easy if you have developed historical data concerning your use of resources, but do not write off an analysis of future needs. If you do not examine upcoming requirements, you may be caught short.

The budget process does not end when your request is approved. Since it is really impossible to have your cake and eat it too, your department will constantly be nibbling away at the budgeted resources.

To ensure that budget plans are on track and to continually update long-term budgets, you must know how much is being spent on what. Your best friend in this ongoing analysis is the company's resource management department. It can tell you what is being charged against your budget.

The more frequent the review of charges, the closer your control of the budget. This will make it much easier to understand expense trends, the reasons behind deviations from the budget, and the soundness of established plans.

You alone as the security department manager are responsible for analyzing your expenditures. Are they tracking with the budget plan? What are the deviations? What is causing them to deviate? Budget analysis on a scheduled basis is the key to showing senior management you are a fiscally responsible manager. Find and fix problems before it is too late. This last aspect is often where even progressive security managers fail to keep pace with other departmental and key resource managers.

It is up to you to ensure a proper budget has been planned, justified, and followed. A good budget is essential to the company's well-being and yours as a manager. Understanding who controls your budget, doing a little homework, and showing a desire to manage your department's resources will protect the company's investments, help your department achieve its goals, and show that you are truly a professional in your field.
COPYRIGHT 1989 American Society for Industrial Security
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1989 Gale, Cengage Learning. All rights reserved.

Article Details
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Title Annotation:understanding your company's budget process
Author:LeFew, C.F.; Jenkins, C.G.
Publication:Security Management
Date:May 1, 1989
Words:1940
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