Whether you are an IT manager hoping for upgrades, an operations manager looking to add more resources, or one of a thousand managerial functions looking for approval on a PO, it is imperative to understand what drives the CFO’s thought process. Very few of us are fortunate enough to work in companies that have unlimited budgets and rubber stamp approval processes. Today’s businesses must invest smartly to remain competitive. That means that expenses, especially new ones, must be researched and thought-through before costs are incurred. If you have budget responsibility or purchase influence in your organization, there are important steps you can take to obtain the approval of your CFO.
- Do your homework
Unless you are purchasing paper clips, you need to be well informed. What is the purpose of the expense? How confident are you in the provider’s ability to meet your objectives? Will they provide a service guarantee? Does your confidence come from a place other than their marketing? Have you checked references? Are they financially stable? Who else did you consider?
- Review options and get competitive bids.
It’s important to understand the marketplace before you submit a PO request. Unless you require a product or service that’s only offered by a single source, then you better know who else can provide this solution, and at what cost. Getting competitive bids from several viable alternatives is valuable. First, it demonstrates that you have a good understanding of who can provide a quality solution. Second, it shows that you are fiscally responsible with your company’s resources. Now some may deduce that CFOs only approve the cheapest price. But for most of us CFOs, that is not true. We want a good value for our dollar. If a higher price option provides a discernably better value, then it will absolutely be considered. But remember, all quotes must be viable options – don’t stack the deck with cheap stuff that doesn’t meet your QC standards, or over-indulgent options just to get your favored bid approved.
- Items outside of the budget will require intelligent justification
Companies invest significant time and energy to construct a sound budget. Every year there are many more budget requests than can be fulfilled. Hence the fine art of prioritizing funds, meticulously crafting ROI (Return On Investment) models, calculating projected cash flows, and managing fiscal risk are paramount to a CFO’s success. Therefore, if you find yourself requesting an item that is not budgeted, think carefully. If it’s a need, proceed with sound rationale, articulate why it’s needed and communicate the problem it is intended to solve. If it’s a discretionary item, understand the upside and the downside of revising the budget to include a new item. Consider the other item(s) that may need to be postponed to free available funds – sound budgeting is about smart prioritization.
- Look for efficiencies and savings in ongoing and recurring budget expenses
It is easy to get caught up in new budget items, forsaking long established budget items. Costs associated with technology and telecom, for instance, can carry meaningful monthly recurring expenses. Not only have smart phones, tablets and desktops become more powerful and more affordable, so have telecom services. If you’ve neglected to review options for Internet services, for example, then you are probably paying above current market rates. Surely, your CFO would appreciate an increase in bandwidth that affords a budget savings too. No matter what industry you work in, there are always many more budget requests than can be accommodated. Our job, as CFO is to help our employees make smart decisions that move the business ahead. Expenses that increase productivity, add customer value, and generate tangible bottom line results must be prioritized above others. Line items that provide savings to existing budgets can often help fund new expenses.
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