Reprinted with permission from IOMA
Issue 00-03 MARCH 2000 (Susan Patterson, Editor)
Most training managers think about their budgets the same way they think about going to the dentist-you've got to do it, but it's no fun and you want it to be over fast. But budget you must or you may lose face-and your funding for future training programs. They key to successful budget management is (a) understanding what senior management expects from you regarding training expenses; and (b) tracking your budget so you can produce information they need.
Begin by asking yourself these questions, taken from Managing a Small HRD Department, by Carol P. McCoy (Jossey-Bass, San Francisco).
1. What numbers do I need to track? Most numbers people will want to know what you have projected in terms of spending for the month and how closely you've kept to that plan. Even if you don't control your training budget now, demonstrating that you understand budgeting requirements may win you control in the future, McCoy points out.
Be prepared to translate your budget categories into those used by your company's finance department. It's also important to build a good relationship with your cohorts in the finance department so that they'll help you develop budget numbers that senior management wants and expects.
2. When do I need to produce reports? Some companies will want you to produce spending reports on a monthly or semi-monthly basis. Find out if and when you'll be expected to budget for the current year, next year, and further out. Does senior management want monthly, quarterly, semi-annual and annual expense projections? What about when you've over-or under budget? (Don't let this happen, MTD advises. It's crazy, but if you spend less you'll get less next year).
3. What information should you include in your reports? If spending for training programs varies from your projections, do you need to explain the variance in terms of the bottom line or in terms of specific budget categories? These might include: salaries and related expenses; computer and data processing expenses; travel and entertainment expenses; charge-backs for training, and so on.
Even if you're not required to report this detail to senior management, you'll want to know how your department is performing in each of these categories, McCoy notes.
4. How much budget "slippage" is okay? If you're regularly running under budget, you may give your bosses the impression that you are short on finance savvy, McCoy warns. They may mistakenly conclude that you're unable to forecast when you really need to produce training programs, or that you're intentionally asking for more than you need, or that you're falling short in providing the programs you promised, all of which are impressions you don't want to make.
5. When will your budget be under scrutiny? Simply staying at or slightly under budget isn't enough, McCoy says. Some budget slippage is expected, say at the first of the year when there might be a delay in payment of bills.
As the year unfolds, however, you'll be expected to stay within your training budget or rework it to more accurately reflect increased demand for training and other programs. Since it's senior management's job to track your organization's overall economic performance, they need to be able to project with some accuracy how income and expenses will play out over the year.
"When you are under your budget plan," McCoy explains, "senior management wants to know whether this reflects 'real savings' or inaccurate prediction of expense timing. When you are over your budget plan, senior management wants to know if you can get back on track by saving on other expenses."
Tracking your training budget
Once you have the answers to these five questions, you can create a tracking system that will produce the answers senior management wants. You can use something as simple as an Excel spreadsheet for this. In it, you will record your monthly budget projections and actual expenses. You can set up a simple formula to calculate variance from your budget plan on a monthly, quarterly, and year-to-date basis. (See Table for McCoy's sample budget tracking report). Each month you will simply update your actual expenses.
It's also helpful to keep a record of expenses for each training program you offer. This would include expenditures for consultants, materials, training facilities and equipment, food, travel, and of course, charge-backs to specific departments if you have that kind of arrangement in your organization. Tracking these expenses allows you to measure how accurately you were able to forecast expenses.
Caution: Do this on an ongoing basis, even if you feel pressured to do training, not run numbers. McCoy learned the hard way how difficult it is to unravel program expenses after the fact.
How did you do?
It's important to measure how well you manage your training budget. Here are some effective criteria: