.jpg)
.jpg)
How to make agency budgeting (more) painless
One of the most important tasks for year-end planning is putting together your budget for the following year. And, while it’s not a task many of us look forward to, it doesn’t have to be as much of a chore as we think.
Reviewing your past agency financials
The first step in putting together a solid budget for next year is taking a good look at prior financials. We recommend the following steps:
- Review your profit and loss statements from prior years. Were there any significant differences year over year? If you had a budget for last year, what were the actuals vs. that budget? If you find material variances, dig a little into the root cause and either adjust your spending or your budget for next year.
- Review your disbursement by vendor. Review each of your vendors with a critical eye. Has their price increased? Do you know exactly what the vendor provides to your agency? Is there an opportunity, perhaps, to negotiate a better rate?
- Review your carrier product reports and any profit-sharing agreements. Make sure your management system matches their reports, and check to make sure you’re not in a position to review profit-sharing revenue that you may be missing
A look at the year to come for your agency
With this information under your belt, now is the time to think about the year to come. This includes the following steps:
- Make sure you understand your goals. Do you want to provide better benefits for your employees? Perhaps hire new staff, such as a new account manager or producer? What about infrastructure; do you need an IT upgrade? Or do you want to pay down debt?
- Develop a plan to meet those goals. The exact plan will vary from agency to agency, but, in general, you want to increase revenue and decrease costs. What changes do you need to make to do so?
- Plan for future taxes. It’s extremely important to understand your tax obligations for the upcoming tax year so you can make sure to set aside the necessary funds to meet those obligations. Work with your tax professional if you’re not sure.
- Seek professional advice. Sometimes, the least expensive route is to bring in expert help when you need it. If you’re not sure about some aspects of your tax picture, budgeting, or financial planning, make sure you reach out to a professional accountant and/or financial experts.
Now what?
OK, so you’ve taken a close look at the last few years, and have a pretty good idea of what you want the next year to look like. What do you do now?
- Input your budget into your accounting software (or use a spreadsheet if your software doesn’t include that functionality). And make sure you put aside time to review your actual vs. budget as the year progresses.
- Train your agency leadership. One of my favorite quotes is “a change imposed is a change opposed.” It’s good management practice to include your key staff, both managers and influencers, is decisions about their department budgets—it both helps you build a more accurate budget, but also keeps these key people engaged. Also, instead of just saying “no” when asked for budget increases, site down and discuss their department goals and milestones so you can work with them to create a plan.
Pat yourself on the back!
Budgeting for the year to come is a big project. You deserve some self-congratulations once it’s done, you’ve committed to regular budget reviews, and you’ve worked with your team to ensure buy-in. Just remember that a successful budget will evolve with the changing needs of your business throughout the year—so stay flexible!
