How to Improve Budget Owner Accountability: Guide for FP&A

“How can I get my department leaders to be accountable for their spending and engage more with the financial data I share with them?”

It’s a daily headache for finance teams. But if your efforts are going to have any impact on the bottom line, then you need every business leader to be accountable for their budget. You’re looking for department leaders who know whether they’re over or under on budget – and why. They actively use reports and forecasts to plan ahead and inform their decisions. Ideally, they’re looking for ways to be more efficient with every dollar and understand how they fit in the big picture of business performance.

Each business partner will be at a different starting point. It might feel daunting to initiate and encourage this mindset shift, but it’s necessary and possible for FP&A to drive this change and see positive results.

The Status Quo

Generally, budget owners operate pretty myopically, thinking, “How much do I have to spend this year? How can I accomplish our department goals with that money?” They may be functionally unaware of how their spending and budget impact other departments.

Professor Richard Lambert explains it well:

“To be successful up to this point in their careers, they haven’t had to encounter finance and accounting. Now, they’re in positions where issues like budgeting, resource allocation, and performance evaluation are important.”

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‍Strategic budget planning requires a high level of collaboration and coordination, driven by FP&A. Transparency is essential; it’s not enough to prove that you spent the $2 million allocated to marketing, you need to assess how it was spent and measure ROI properly. To succeed, finance needs to help each budget owner plan to manage their spending and deploy dollars more effectively.

5 Ways to Encourage Budget Owner Accountability

1. Start at the top.

Be sure that business leadership are modeling this accountability mindset to set the expectation for all teams. This gives FP&A the support needed to dive into deeper discussions with each business unit.

Then, finance managers can implement new levels of fiscal responsibility from the bottom up and ask business partners: “given these overall strategic goals, what headcount, expenses, and systems do you need to succeed?”

2. Involve stakeholders in building their budget.

Sometimes, finance can be a bit of a black box. FP&A asks business partners for input and comes back with a budget, but doesn’t show how that input was taken into account. But if you send someone a pre-built budget, it’s really your budget, not theirs. It’s far better to co-create it within the bounds of current business goals.

Adopt a business partner approach, knowing that FP&A doesn’t exist merely to drop off arbitrary budgets, gather data, or slap someone’s wrist for overspending. As the finance leader, try to assign a dedicated analyst or team member to cover each business unit and get embedded to understand their goals as you collaborate on the budget and solve problems together.

3. Meet them where they are.

Approach stakeholders with empathy. Consider their underlying motivations for what you might consider willful ignorance or reckless spending.

• It could be their first time doing this, and they need more guidance to build and maintain a budget to achieve their business plan.
• Maybe numbers and financial data just terrify them – an executive with years of expertise and people skills can turn into a deer in headlights when presented with a spreadsheet.
• They may think that profit and loss management is less important than achieving their business plan. You can come alongside to uncover how a responsible budget supports their plan.  

Finance teams can reframe data for greater understanding. For example, savings on salaries may not be a favorable outcome if it means that sales is behind in hires. Or the opposite could be true; an opportunistic hire might be impactful to a key project. This tailored approach builds trust between stakeholders and FP&A and yields more strategic dialogue and results.

4. Provide transparency with automated financial reporting.

Accountable budget owners need frequent insight into their performance against their budget and business goals. FP&A needs to provide budget owners with access to financial data and reports on a regular cadence. Stakeholders have to know how much they are spending so they can begin to self-regulate and adjust based on outcomes and forecasts.

The finance business partner can review these reports as part of regular meetings, explaining the BvA analysis and the implications of either maintaining allocations or making changes to improve performance.

Modern FP&A software like Stratify gives budget owners self-service access to these numbers so they don’t need to wait for finance to provide updates. Your goal here is to remove barriers to access while providing important context for each budget owner.

5. Boost their financial literacy.

Not every business executive is automatically a savvy budget owner. Use meetings with business partners to explain key concepts and answer their questions. You could focus on areas like:

• Comparing their budget to industry averages for similar-sized businesses.
• Regularly reviewing variable expenses to find opportunities to save.
• Ranking expenses by importance and ROI potential.

Financially literate stakeholders will have a valuable skillset that’s in high demand. Plus, they’ll be more engaged in the planning process and appreciate what FP&A can offer to help solve their challenges.

Start a Powerful Chain Reaction

When FP&A helps stakeholders take ownership of their budgets, the value of financial data is elevated. They’ll derive real value from the FP&A reports that you share, and finance will have the integration and respect within the business that it needs to orchestrate strategic financial planning. Don’t shy away from this important responsibility. It’s one of the best ways to build momentum and progress faster toward the business’s short and long-term goals.