How to Make the Most of Your HR and L&D Budgets

Trying to make a budget stay within its limits is hard enough at the best of times but in this economic climate, it can feel a bit like a losing battle.

With organisations across the country facing unprecedented inflation, continuing price-hikes and goods shortages, it’s not surprising that many are finding that the budgets they started the year off with have soon become obsolete and have gone wildly off course.

With that in mind, here are some much needed tips for how you can keep your budgets on track and following that all important dotted line.

1. Use data and analytics to make your budgets go further

This action is closely related to the general performance monitoring of your budget. It’s slightly different though in the respect that you use what you’ve monitored in the previous step to make specific changes to your budget going forward. In other words, if the previous step was generally focused on paying attention to what’s happening, this step is about using knowledge of what you’ve seen to adjust your actions accordingly.

There are a range of tools that you can use to track the analytics most closely associated with budget performance. The exact KPIs (key performance indicators) that you track will depend on  exactly on the type of budget that you’ve been tasked with creating. There are some general features that are usually essential to track on a budget though. The most essential are:

• Fixed, variable and sunk costs
• One-off costs
• Your cash flow

Tracking your cash flow is particularly important when it comes to making the most of your budget. Cash flow is the lifeblood of your business. It basically describes how much money is coming into your business over a particular period of time and it’s essential to the sustainable functioning of your business. A strange fact is that perfectly profitable businesses that are making money hand over fist can often be strangled by poor cash flow. That’s why using data and analytics to predict, measure and monitor this metric in a budget can be particularly useful for getting the most out of your budget. This approach essentially allows you to catch small problems early before they spiral out of control.

2. Prioritise

If you’re stretched on particular areas of your budget and you’re going to have to redistribute resources, prioritising projects that will give you a higher return on investment overall can help you to wring more out of your budget than initial circumstances might allow.

Knowing how to prioritise projects can seem particularly complicated because there are a lot of interlinked factors to consider. It basically comes down to being able to work out which tasks are more important than other ones and need to be completed before others.

When you’re working out which projects to prioritise, consider factors like:

• What tasks are essential and urgent and need to be completed by a particular period of time?
• What tasks can be considered less essential and urgent?
• What are the consequences of not completing a particular task on time?
• How will not completing a task affect others in your workplace?

3. Cut costs where you can

Unfortunately, life can hand us a whole load of lemons sometimes. When it comes to managing a departmental budget, a whole host of macro and microeconomic issues can affect how far a budget stretches.

For example, take the recent spike in inflation that has hit the UK economy over the last year. Coming with very little warning, it took a lot of businesses and organisations at unawares and has thrown even the most careful and meticulously planned departmental budget into disarray.

With the public finances stretched more than ever due to the ongoing disruption of Brexit, the war in Ukraine and the impact of the COVID-19 pandemic, it’s not surprising that HR and L&D departments across the country are discovering that their budgets aren’t going as far as they used to. As a result, they’re being forced to readjust their allocations and even start cutting back on costs that they had previously considered well within their ability to meet.

4. Know what you can get rid of if you need to

Being aware of what things in your budget can be jettisoned if you find yourself in the unwelcome (but common) scenario of needing to make cuts is an essential skill when it comes to helping your budget perform better.

Is there an optional perk somewhere that costs a lot of money and delivers fairly little in return? Does something exist on your budget that’s just nice to have and not truly essential to the functioning of your HR or L&D operations? If so, those are the things that you should be looking to cut when it comes to economising on things.

A key part of working out what you can cut is assessing the respective benefit that each element of your budget provides. In some cases, you might not need to cut it altogether: you could just substitute something for a cheaper alternative.

5. ..And know what’s essential to keep

At the same time, it’s also very wise to be aware of the things that are absolutely essential to the operation of your department and that cannot be cut from the budget under any circumstances.

Most of the time, you will have a good professional understanding of the things that your department absolutely needs and that need to be kept in a budget. The problem comes when your HR and L&D budget is taken out of your hands and decided by other people who don’t deal with the day-to-day operations of your department.

Horror stories exist of departments that found essential elements had been cut out of their departments when they were left out of the budgetary process, or even worse: they were just plain ignored.

To play on the safe side, when you’re assembling your budget, make a point to identify the things that are crucial to the smooth functioning of your department and mark them as things that can’t really be left out of your budget. Be prepared to fiercely defend particular budget elements if you need to.

6. Have an efficient system to monitor spend

Monitoring budgets is crucial if you’re wanting to help it go further overall.

By investing time and energy into creating an efficient system for monitoring spend, you can ensure that you respond to threats in real-time, ultimately keeping the budget on track in the long-term.

This great blog by HB Publications outlines the five elements that should go into the budget process. They argue that the process of monitoring a budget should be made up of these five things:

1. Find out the current situation of your budget
2. Compare your current situation with your budget
3. Find the difference between the actual and planned expenses
4. Uncover the reasons behind this difference
5. Try to make up the difference by reducing costs/reassessing

7. Be realistic - and assertive

A key reason many budgets fail is because of the fact that they’re unrealistic: they attempt to achieve things that they just don’t have the adequate level of resources to do. This is a problem that affects budgets that are made without really taking into account the expertise of the people who are in charge of doing day-to-day work on the ground.

The vast majority of HR and L&D departments will be responsible for making their own budgets which are then signed off by senior management, but there may be a few workplaces where people who don’t work in your department set your own budget for you. As a result, you can end up in a situation where a budget doesn’t go far enough because it wasn’t created with knowledge and expertise of that particular area.

One of the best ways to make the most of your HR and L&D budgets is to try and play an active role in the drafting of them and be assertive when it comes to standing up for particular expenses to senior management. If you believe that an item on your budget is absolutely crucial to meeting a key objective set to you, don’t be afraid to argue for it assertively if people don’t give it enough space in the plan.

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