Companies big and small develop an annual budget and spend a lot of management time discussing, creating and finalizing it. Much of that time and effort is wasted if you don’t spend even more time working to execute the plan in the budget and hit your financial goals. Here are five tips for achieving the financial goals in your budget.

First, make sure everybody on your management team, if not everybody in the company, knows what your financial goals are for the year and what your plan is to attain those goals. Your budget is a detailed numerical representation of your goals and plan so that means you’ve completed your goals and plans for the next year. To attain those objectives, get your people familiar with your goals and how you plan to achieve them. Whether your company has an open book philosophy or keeps its financial performance limited to a select few people, you can inform everybody of your goals and plans; the more you lean towards open books, the more details you’re willing to share. In sum, the more your team knows what you’re trying to achieve and how you plan to achieve it, the better your chance of success.

Second, get each of your managers to demonstrate both buy-in and responsibility for achieving their section of the budget as well as doing everything possible to help the company achieve its overall financial goals for the year. For example, the VP of Sales should be positive and optimistic when sharing the sales departments sales and revenue goals for the year. There should be no second-guessing the plan after it’s been finalized. The time for questioning the goals was during the development and finalization of the budget. Another example, the VP of Engineering should not join the naysayers if they say “but we can’t achieve these goals without more resources.” Your team needs to see and hear that their leaders have confidence in the plan and the company’s ability to achieve the financial goals.

Third, manage to your budget. You and each of your budget-responsible managers should refer to the budget when making spending decisions to make sure each department stays within its budget. This is particularly true when you’re about to spend a large amount of money (relative to the size of your budget) and/or that the manager knows the expenses are not included in the budget. The first step is to see if that expenditure is included in your budget. If so, you can proceed, but if not, your next step should be to figure out what you can cut out of your budget (either in full or in part) so that you can go forward with the current spending decision and still hit your expense budget for the year. While it’s best to start looking at your budget for that line item (for example, Advertising,) there is generally nothing wrong with reducing one type of marketing expense for another type of marketing expense. The manager in charge of marketing, for instance, could reduce advertising expense to help pay for an additional employee so long as he/she is still focused on achieving the marketing, revenue and profit goals of the company.

But what should a manager do when he/she believes it is very important to incur an unbudgeted expense and can’t find or is unwilling to reduce other line items in the his/her budget to keep within the budget for the year? First, it is part of the manager’s job to make tough decisions, and spending less on some things to get something else they want can be a tough decision. Their goal should be to find the needed money within their own budget. If they don’t, can’t or won’t, then the decision should be discussed by that manager with his direct supervisor or peers. That manager should come to such a meeting prepared to make the argument that the company is more likely to hit its current year financial goals (typically at the EBITDA or Net Income level) if they spend the money on his/her unbudgeted item and give up something in another department’s budget. In the absence of an agreement among those people, a VP or CXO could request a decision by the CEO or COO. Decisions made at that level should also look first to reduce expenses elsewhere in the budget which would keep total expenses for the company within budget for the year.

Fourth, the CFO, whether full-time or part-time or in the absence of either the Controller, should produce and share departmental income statements with comparisons to budget that also show how much money is left in each line of the budget for the year. Before continuing, let’s be clear on what a departmental income statement compared to budget is. It shows the actual expenses and budget expenses for each line item in each respective manager’s budget. It should be produced showing the current month (i.e. the one most recently completed) along with year-to-date figures for each of actual and budget. For all periods, it should show the variance between actual and budget meaning how much over (a negative variance for expenses) or under (a favorable variance for expenses) that department was for that line item for the period.

Certain accounting software programs including Quickbooks Online offer an option to produce a column that shows the amount remaining in the budget for the year for each line item. Please be aware, however, that when you call this report from Quickbooks, it includes all actual expenses that have hit the QBs general ledger for the year—not just year-to-date for the closed accounting periods. Thus, if your accounting team has closed the books through April and then produces and distributes the departmental income statements showing the remaining amounts for the year, it will include those expenses that have already hit the general ledger for May (and possibly beyond if you have recurring journal entries.) There is a positive to this in that your manager will see what they’ve incurred for the whole year not just through the end of the last closed accounting period, but the total spend will differ from the amount on their year-to-date departmental income statement. If you want your managers to see what’s remaining as of the end of the last closed month, you can export the report to Excel and change any actual numbers after the closed month to zero

Fifth, in the absence of a board which approves budgets and/or spending plans, the CEO may decide that the company should spend money on an unbudgeted item to either help improve the likelihood of attaining its current year goal or investing in the growth of income in future years. Typically, such decisions involve input from the leadership team, and the company CFO, again either full-time or part-time, should be advising the CEO as to the impact on cash, financial covenants with lenders, and commitments to the board if not also playing the more conservative devil’s advocate.

Annual budgets are great planning tools. To make them great execution tools and help you reach your annual financial goals, I strongly urge you to take the steps described above. If you have any questions or need help with this, please reach out to me at