Monday 5 May 2008

Eachan's 5 Simple Rules for Fiscal Happiness

As you gradually make the move from engineer to engineering management you inevitably take on more administrative duties and eventually this path will yield up responsibility for a budget. This can be a scary thing for techies, but the good news is the world of accounting is no different to anything else we do - you can peel away all the layers of complexity we're so fond of creating and reduce it to a mere handful of things that really matter.

Here are my 5 simple rules for responsibly managing any budget of any size:

  1. Teach your staff about ROI. Get them in the habit of putting things forward to you in a cost/benefit format, it's good practice for them and will save you time having that 1st level filter in place.
  2. Every £1 spent must return more than £1 in value. Sometimes this is obvious and sometimes it can be a little intangible; try imagining yourself explaining it to your boss and if that feels OK it'll probably pass.
  3. [once past number 2] There must be no better use of that £1. If you decide, for example, it's worth spending £2K on attending a conference then have a quick think before committing that cash. You've determined you're prepared to part with £2K so what else could you do with that money, and do any of those other ideas return more business value?
  4. Always manage to the bottom line. There are a whole lot of ways to look at how cash resources are being utilised - headcount, line categories, fixed and variable costs etc but at the end of the day the only material thing that matters is you spend less than you earn.
  5. Don't go over budget. Sounds simple but it's amazing how many people do this all the time; for the best of reasons - they think it's OK if it's for a good reason. It's never OK, cashflow is the heart of every business. If you have a brilliant idea but not the available budget to do it then put together a business case and ask for more.

Managing a budget doesn't have to be that difficult, with a few simple rules and a bit of common sense you'll still have plenty of time left over to see some engineering get done!

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