Help me convince the board that our company needs a budget!

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills.
Locked
Topic Author
Van Down By Da River
Posts: 69
Joined: Wed May 22, 2019 2:27 pm

Help me convince the board that our company needs a budget!

Post by Van Down By Da River »

So, here is my predicament…

About 3 years ago, I started working at my wife’s family business (manufacturing) doing the accounting, along with wearing about 10 other hats, and one of the first thing I noticed was that, for the 45 years that we have been in business, we had never had a budget??!

The process as it stands now, is every month, we go over, line by line all of the accounts and compare where we are this year compared to the same period last year, then again once a year when we get our statements from the accountants.

However, there has never been a forward looking budget and/or sales goals for the next quarter, year, etc. (also no formal/informal 1, 3, 5 or 10 year business plan)

On top of that, the vice president (my father in law) has been recently pushing to just go over the numbers quarterly because he doesn’t want to deal with it and think it is all that important?!? (He is also about 1-3 years away from retirement and has significantly been reducing his role)

I guess the question is, how do I (the low man on the totem pole), go about convincing the wife (president and part owner), the father in law (vice president), and the mother in law (absentee owner, inherited company) the importance of creating a budget? I have a budget created and ready to go, I just need to figure out a way to get it in front of the board…

I have casually mentioned it numerous times and have been told over and over again that we have been doing it this way for 45 years and it has worked fine (I literally hear this same phrase uttered on a weekly basis when I attempt to change things)
smitcat
Posts: 13308
Joined: Mon Nov 07, 2016 9:51 am

Re: Help me convince the board that our company needs a budget!

Post by smitcat »

Van Down By Da River wrote: Fri Jul 26, 2019 11:09 am So, here is my predicament…

About 3 years ago, I started working at my wife’s family business (manufacturing) doing the accounting, along with wearing about 10 other hats, and one of the first thing I noticed was that, for the 45 years that we have been in business, we had never had a budget??!

The process as it stands now, is every month, we go over, line by line all of the accounts and compare where we are this year compared to the same period last year, then again once a year when we get our statements from the accountants.

However, there has never been a forward looking budget and/or sales goals for the next quarter, year, etc. (also no formal/informal 1, 3, 5 or 10 year business plan)

On top of that, the vice president (my father in law) has been recently pushing to just go over the numbers quarterly because he doesn’t want to deal with it and think it is all that important?!? (He is also about 1-3 years away from retirement and has significantly been reducing his role)

I guess the question is, how do I (the low man on the totem pole), go about convincing the wife (president and part owner), the father in law (vice president), and the mother in law (absentee owner, inherited company) the importance of creating a budget? I have a budget created and ready to go, I just need to figure out a way to get it in front of the board…

I have casually mentioned it numerous times and have been told over and over again that we have been doing it this way for 45 years and it has worked fine (I literally hear this same phrase uttered on a weekly basis when I attempt to change things)
"I guess the question is, how do I (the low man on the totem pole), go about convincing the wife (president and part owner), the father in law (vice president), and the mother in law (absentee owner, inherited company) the importance of creating a budget?"

Family business, not your family, you are new to the business, this is one of many projects and changes that your opinion will likely lose out on.
It would be a good time to asses staying in this position.
onourway
Posts: 3778
Joined: Thu Dec 08, 2016 2:39 pm

Re: Help me convince the board that our company needs a budget!

Post by onourway »

It's been working for 45 years and has worked fine. :D

Seriously, if the company has been in business this long and there are no current finance issues, I'm not sure what you hope to achieve?

Why do you think the company needs a budget today when it has not in the past? You must have some argument that counteracts their complacency. What benefit will it bring to the company? What risks does it stand to mitigate? Can you articulately make this argument?

What does your wife think of this reasoning?
Jablean
Posts: 872
Joined: Sat Jun 02, 2018 2:38 pm

Re: Help me convince the board that our company needs a budget!

Post by Jablean »

Start a month or a quarter at a time looking at cash flow. Showing that you are looking at how much money you need to have readily on hand to pay the next quarter's bills.

But start with your wife, the company President, on an actual budget. Is there a rule against meeting with her, by herself?

What you are looking for is a forward looking document that right now doesn't look at sales goals but a budget can be based on the past. In manufacturing are you looking at replacing any equipment? Hiring? Questions about what to do if we get a big request, can we handle it?
Topic Author
Van Down By Da River
Posts: 69
Joined: Wed May 22, 2019 2:27 pm

Re: Help me convince the board that our company needs a budget!

Post by Van Down By Da River »

onourway wrote: Fri Jul 26, 2019 11:19 am It's been working for 45 years and has worked fine. :D

Seriously, if the company has been in business this long and there are no current finance issues, I'm not sure what you hope to achieve?

Why do you think the company needs a budget today when it has not in the past? You must have some argument that counteracts their complacency. What benefit will it bring to the company? What risks does it stand to mitigate? Can you articulately make this argument?

What does your wife think of this reasoning?
My wife is open to the idea, but isnt 100% sold on the idea...

To put it in bogleheads terms, it is much like an Edward Jones customer, who's says their retirement fund is 'doing just fine' because the balances keep going up 6% a year (when the market goes up 9% per year)

We just closed out the third year where management had no idea how certain parts of the budget were doing until the year already closed out and we have ran into unexpected tax issues, budget shortfalls, etc.

Just because it has been doing 'just fine' doesn't mean it couldn't be doing a lot better
User avatar
Tyler Aspect
Posts: 1620
Joined: Mon Mar 20, 2017 10:27 pm
Location: California
Contact:

Re: Help me convince the board that our company needs a budget!

Post by Tyler Aspect »

In my corporation that I used to work for the divisions are typically organized as "plan of record" types or "profit and loss" types. The plan of record type business are support functions or platform enabler business that operate according to a plan. The profit and loss type business are the public facing business that get measured by how much money they make.

Maybe your goals are too ambitious. If you can generate a set of extra metrics for informational comparison purpose that could be an easier sell then trying to convert the business to plan of record operated.

As a junior partner in the business your role might be to bring in insight and value, but not wrestle control from the senior partners.
Last edited by Tyler Aspect on Fri Jul 26, 2019 12:32 pm, edited 2 times in total.
Past result does not predict future performance. Mentioned investments may lose money. Contents are presented "AS IS" and any implied suitability for a particular purpose are disclaimed.
Afty
Posts: 2390
Joined: Sun Sep 07, 2014 5:31 pm

Re: Help me convince the board that our company needs a budget!

Post by Afty »

I would phrase it as, we these current problems. Remember when x happened and we had to scramble for 2 weeks to find funding for it? How can we prevent those things from happening again? One option is a budget...

You want to present a problem and invite them to help you solve it. The best thing you can do is get them to propose the idea you already have in mind, without you having to say it.
Last edited by Afty on Fri Jul 26, 2019 12:20 pm, edited 1 time in total.
jello_nailer
Posts: 571
Joined: Sun Apr 07, 2019 10:20 pm

Re: Help me convince the board that our company needs a budget!

Post by jello_nailer »

I was in a 2 hour FY20 budget and planning meeting this morning. S&OP.
Just this morning I said this:
"I do understand that budgets are notoriously wrong, inaccurate, and probably useless, but we still need them for planning purposes".
A redraft of an old quip. And that's all I have to say about that.
User avatar
Stinky
Posts: 14159
Joined: Mon Jun 12, 2017 11:38 am
Location: Sweet Home Alabama

Re: Help me convince the board that our company needs a budget!

Post by Stinky »

Does the company make any capital expenditures? Building, major equipment, and the like? If so, what is the process used to decide on whether to make an investment?

It seems like a capital budgeting process could be extended to a broader budget project.

But your wife must be on board first.
Retired life insurance company financial executive who sincerely believes that ”It’s a GREAT day to be alive!”
User avatar
9-5 Suited
Posts: 1307
Joined: Thu Jun 23, 2016 12:14 pm

Re: Help me convince the board that our company needs a budget!

Post by 9-5 Suited »

I don't know how far you'll get with the "what", which is telling them they need a budget. A budget is a tool to solve a set of problems and/or create growth opportunities by more efficiently allocating resources.

So you might wait until your wife expresses a mild concern related to one of these areas, maybe a small comment about not being sure how this year's profit will end up, and suggest an organized budget to solve the problem.

I agree with you though - it's crazy for a business not to use a budgeting process. If I were a prospective investor and I heard management didn't have a regular budget, I'd run for the hills.
ronno2018
Posts: 567
Joined: Sat Apr 14, 2018 9:31 am

Re: Help me convince the board that our company needs a budget!

Post by ronno2018 »

When you arrive at a new job and have some ambition and intelligence it can be hard to accept the status quo. There are strategies to make change happen -- this book might help -- https://hbr.org/2016/11/5-mistakes-empl ... status-quo https://www.amazon.com/Rebels-Work-Hand ... 1491903953

The challenge in your setting is the family relationships. Like someone else said you might consider trying your best for awhile and then moving on if it gets too frustrating. That might annoy your family for a bit but I am sure they would understand.

I have found in my career sometimes it really is astonishingly rejuvenating to get a fresh start in a new organization periodically.
latak215
Posts: 71
Joined: Sat Nov 26, 2016 6:41 pm

Re: Help me convince the board that our company needs a budget!

Post by latak215 »

I believe the best strategy wold be to be as nice as possible to your wife and utter your b word less often, you will get your wish as you ascend on the totem pole
HomeStretch
Posts: 11423
Joined: Thu Dec 27, 2018 2:06 pm

Re: Help me convince the board that our company needs a budget!

Post by HomeStretch »

Budgets, forecasts and business plans are the norm in many businesses. In your accounting role, it’s understandable that you would suggest them. However, you have been clearly told (perhaps multiple times?) by the owners/more senior managers that they do not see the need. You need to let it go for now unless you see a business trend like a significant margin/profit decline or cash flow issues.

It’s good that you gave your suggestions, but once owners/senior managers make the decision, you in your less senior role need to support it.
User avatar
LadyGeek
Site Admin
Posts: 95704
Joined: Sat Dec 20, 2008 4:34 pm
Location: Philadelphia
Contact:

Re: Help me convince the board that our company needs a budget!

Post by LadyGeek »

Human Resources has determined that budgets need to be worked out among the management team.

Translation: This thread has run its course and is locked (relationship issue - off-topic). See: Acceptable Topics and Subforum Guidelines
This is an investing and personal finance forum. We also maintain a subforum that allow our members to discuss consumer goods and services and recreational activities. Anything else is considered "Off Topic" and is not acceptable on this forum.
Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.
Locked