How finance leaders can educate and empower budget owners

Shirak Zakaryan is a father, investor, and fractional CFO. At StratFi Consulting, Shirak provides fractional strategic finance support to early-stage companies that are looking to establish best-in-class practices for the finance function. Prior to StratFi, Shirak led FP&A teams from Series B to Series D companies across various industries, including EdTech, marketplace, and B2B SaaS. Shirak started his career as an M&A investment banker but had the itch to become an operator instead of an advisor and took the plunge into the fast-paced start-up world. 

An often-underestimated role that finance leaders play is that of a bridge — a crucial link connecting the financial perspective with the diverse functions and priorities of various departments. Facilitating this interdepartmental understanding and collaboration, especially in budgeting, is hard. Strategic finance teams want to foster an environment where budgeting is not an activity siloed within the finance department but instead is a collaborative process involving key stakeholders from every department. 

But individuals in various departments are often ill-equipped to develop their own budgets. This knowledge gap can lead to apprehension and uncertainty, leading some companies to compensate by forcing budgets on their teams with little input. Top-down or rushed budgeting processes risk producing budgets that don't accurately reflect departmental needs or align with the organization's broader financial objectives. 

As finance leaders, your role is to bridge this knowledge gap and empower these budget owners, providing the understanding and tools they need to create effective, realistic budgets. It takes time to ensure you are aligned and have buy-in, but spending this time is critical for a healthy organization that meets its goals.

First step: alignment on high-level strategy

The first step in empowering different departments to craft effective budgets lies in establishing a clear, high-level strategy, put together through a partnership between finance and the CEO or co-founders. Once these targets are defined, share them with the leadership team and ask for feedback. It's not just about passing along information; it's about initiating a dialogue. Find out if everyone agrees that this strategy is, in fact, the right one, and align on high-level tactics to get there.

Block three or four days to meet with each budget owner individually. Let the budget owner tell you how they view their function and the key drivers within their function, and then help them understand how their department fits in the context of the organization financially. Gather their insights on what they believe needs to be done within their individual functions to drive those goals. Remember, these leaders are deeply entrenched in their departments' day-to-day operations — they can offer invaluable perspectives on achieving these targets. You’ll learn a lot about how their side of the business works, ultimately helping you tell the story of the numbers and explain the overall strategy to stakeholders more eloquently in the future. 

This high-level strategic alignment creates a unified direction for all departments. It ensures everyone understands the part they play in the company's financial health and growth, creating a solid foundation for more detailed budgeting discussions to follow.

Educating budget owners

It’s likely that budget owners come from non-financial backgrounds and might lack a clear understanding of key financial concepts and budgeting essentials. Even if senior leadership in the department is familiar and comfortable with the process, they’re likely receiving inputs from or delegating the work to their teams. Start with the basics if you’re working with someone new to the process. Ensure they understand things like fixed and variable costs, revenue forecasts, and return on investment. Explain to them the functions of the different departments, including what accounting is responsible for, what finance does, and who to contact for various needs. 

Not everyone learns in the same way. Consider offering a mix of learning formats, from one-on-one sessions to group workshops. Leverage a variety of tools, such as video tutorials, written materials, or interactive software, to make the learning process engaging and comprehensive. Incorporate practical examples that are relevant to their department to illustrate financial concepts. This could involve presenting case studies or creating hypothetical scenarios directly related to their roles and responsibilities. For example, you could demonstrate how a marketing campaign's budget could influence the company's ROI, showing them the trade-offs and consequences of their decisions.

Make yourself available to answer questions or explain concepts that may be confusing. Regular check-ins can help reinforce learning and provide an opportunity to clarify any doubts. Encourage an open dialogue; the more comfortable budget owners feel asking questions, the more engaged they will be in the process.

Providing the tools they need: budgeting systems and software

Empowering budget owners with robust budgeting systems and software can make the task less daunting and more precise. It enables them to model various scenarios, track expenses in real-time, and generate comprehensive reports — tasks that would be cumbersome and time-consuming without the right tools.

A rising tide lifts all boats

By investing time and resources in educating and empowering budget owners, we enable a more participative budgeting process where every stakeholder understands their role and its impact on the company's financial trajectory. This process develops a more financially literate and engaged workforce, strengthening the connection between day-to-day operations and the financial realities of the business.

Enhanced financial acumen of budget owners can transform the budgeting process from a routine administrative task to a powerful strategic exercise. It fuels better decisions, facilitates collaboration, and fosters a shared sense of responsibility for the organization's financial success. In the end, when we educate and empower budget owners, we're not just improving our budgets — we're enhancing our organizations.