Budget Revision Methods

𝐑𝐞𝐯𝐢𝐞𝐰𝐢𝐧𝐠 𝐛𝐮𝐝𝐠𝐞𝐭𝐬 𝐥𝐢𝐤𝐞 𝐚𝐧 𝐅𝐏&𝐀/𝐅𝐁𝐏 𝐞𝐱𝐩𝐞𝐫𝐭 Oya, Oya, before I come into your feed like an FP&A ghost, let me apologize for going quiet for weeks. Juggling work and showing up here has been real. I am sorry, okay? I am no soothsayer but if you started your budget process in time (like I told you to), you should be deep in budget consolidation/review. Still explaining your template to departments? Meet me at 12pm at ANY location of your choice so we square off! Budget reviews can be messy, but I’ve refined a sustainable, foolproof approach. Here’s how I tackle mine: 1. Start with the story not the spreadsheet Ask: “What’s the story this budget is trying to tell?” Your budget should show: >> What’s driving growth next year? >> What changed vs. last year? >> What’s the business betting on? If the narrative doesn’t line up with the numbers, pause first. 2. Benchmark against reality Compare submissions against: >> Last year actuals (and YTD run-rate). >> Targets in the strategic plan. >> Peer business units or competitors. Patterns expose stories or lies instantly. Sudden jumps should have reasonable drivers. I often highlight top 10 movements (positive or negative) and ask for a 2-line explanation. 3. Challenge the logic ALWAYS Solid FP&A persons review operating drivers before the numbers Ask these: “What volume growth are you assuming?” “What’s the price per unit or per customer?” “How does this compare to actual trends?” “What happens if conversion or retention drops by 5%?” 4. Review headcount! Check for: >> Alignment with HR’s manpower plan. >> Realistic hiring timelines (people assume January start; in reality, it’s April). >> Salary inflation and grade structure accuracy. >> Fringe benefits, taxes, pensions. People forget these. 5. Validate cost drivers Every line item must have a driver or owner. If someone can’t explain what drives the cost, it’s suspect. Ask: >> “What activity drives this spend?” >> “What KPI does this expense support?” >> “If volume doesn’t happen, will this cost still be incurred?” 6. Run ratio checks: Ratios catch what Excel hides. Key ones: >> Staff cost / Total Opex → sudden jumps = check payroll or hiring plan. >> Cost of Sales / Revenue → margin control. >> CapEx / Revenue growth → are we investing enough to justify growth? If ratios move dramatically year-to-year, you either discovered an opportunity or a problem. 7. Challenge the Timing of Spend Budgets assume linearity but life doesn’t. Ask: >> “When will this project start?” >> “When will spend hit?” >> “When does benefit start showing up?” “Q1 spend for Q4 results,” is not a budget; that’s wishful thinking. 8. Look for duplication and missing costs Cross-functional teams often double-budget: >> IT & Product: cloud costs >> Marketing & Brand: campaigns >> HR & Admin: training Scan for similar descriptions, vendors, GL codes, and check for missing costs (shared services, depreciation, licenses). Hope this helps!

I've helped dozens of companies tackle budget overruns. Most try complex solutions: zero-based budgeting, new policies, department restructuring. But the most effective approach I've seen? One CEO spent 60 minutes reviewing coffee expenses line by line. Seven years ago, I was managing a team at a different company. Our expenses had skyrocketed, and our revenue wasn't keeping up. So when the CEO called in the head of the worst-offending department, everyone expected the worst. We'd spent the previous week brainstorming ways to prevent the crisis: rebudget, assign a new budget owner, cut next year’s budget by 20%, slice the data three more ways, add new policies—the list went on. But our CEO was over it. So he asked for the previous quarter’s expenses from the most problematic department, called in the department head, and spent an hour going through each expense line. It wasn’t pleasant, it ruffled feathers, and it even involved the CEO grilling the department head about “coffee costs.” But it worked. That department became one of our most efficient spenders the next month. That’s when I first saw the power of the line-by-line review. Ultimately, you want to give your teams the flexibility to spend money, encourage fast action, but still retain control. When done successfully, it changes the culture of how teams spend and empowers department heads to own their expenses. The beauty of the process is that it doesn’t require a kick-off meeting, a PowerPoint, or a team alignment meeting, saving the executive team’s time. All you need to do is: 1. Get the last quarter’s expenses - To keep the review focused, include only the amount, date, and description. Anything else is superfluous, and you don’t want to get caught up in chart-of-account categorization discussions. 2. Sort expenses from high to low - Generally, a quick sort will ensure focus on the "biggest of the small stuff." The one exception to this would be if you notice a huge amount of small costs that add up to a large total when doing your initial review. 3. Go through each line - While this requires nuance, consider asking questions like: • Was this expense necessary? • What was the result of this spend? • What would you have done if this budget line was cut? 4. Ask about missed spending opportunities - This is the KEY step. The goal of a company is to generate returns by spending money productively. So as we cut unnecessary or wasteful spend, we should also be looking for opportunities to spend this money more advantageously. To get to the heart of this, I recommend asking at the end of the meeting: • What could you have spent more on to produce a better result?  • If you added an extra 20% to your budget, where would it go? This is how we learned of a fantastic training course for our sales team that drove record numbers the following quarter. Money well spent! One of the best parts about this approach is that it requires hardly any planning. So why not give it a shot today?

When management changes the finishes but expects the same budget, it creates a cost-pressure situation. The new specifications may increase material and labor costs, creating a risk of budget overrun unless adjustments are made elsewhere. Possible Solutions 1. Value Engineering • Review the new finishes and find alternative materials or suppliers that achieve a similar look or quality at a lower cost. • Example: Use locally sourced materials or equivalent-grade products instead of premium imports. 2. Scope Adjustment • Propose reducing or simplifying certain design elements to balance the added cost of the new finishes. • Example: If flooring quality is upgraded, consider simplifying wall finishes or ceiling designs to offset costs. 3. Budget Revision • Present a cost impact report showing the financial difference between the old and new finishes. • Request management to approve a budget adjustment based on the revised scope. 4. Phased Implementation • Suggest completing high-priority or high-visibility areas with the new finishes first, and postpone others until additional funds are available. 5. Supplier Negotiation • Engage suppliers and subcontractors early to negotiate better pricing or discounts for bulk purchases or revised specifications. 6. Internal Cost Optimization • Identify non-critical expenses or operational efficiencies (e.g., logistics, labor scheduling) to save costs elsewhere in the project.

A simple gut check to reset your budget Step 1 Pull your last two quarters of inbound revenue. Get enough volume to see patterns. If your sales cycle is long, go even further back. Step 2 Map each deal back to its real source. Use self-reported attribution, attribution software, sales notes, call recordings. Whatever helps get closer to the truth. Step 3 Label the origin by motion. Did that deal come from Brand, Demand, or Expand activity? Step 4 Compare the results to your budget. If you spent 80 percent of your budget on paid programs, but your best inbound came from organic or word of mouth, that’s a misalignment. If 40 percent of your revenue came from existing customers, but Expand got zero investment, that’s another gap.

💼 𝗬𝗲𝗮𝗿-𝗘𝗻𝗱 𝗕𝘂𝗱𝗴𝗲𝘁 𝗥𝗲𝘃𝗶𝘀𝗶𝗼𝗻 𝗳𝗼𝗿 𝗖𝗼𝗻𝘀𝘁𝗿𝘂𝗰𝘁𝗶𝗼𝗻 𝗣𝗿𝗼𝗷𝗲𝗰𝘁𝘀   As the year comes to an end, it's recommended for construction projects to revise their budgets to ensure better cost control for the upcoming year.   𝗞𝗲𝘆 𝗦𝘁𝗲𝗽𝘀 𝗳𝗼𝗿 𝗬𝗲𝗮𝗿-𝗘𝗻𝗱 𝗕𝘂𝗱𝗴𝗲𝘁 𝗥𝗲𝘃𝗶𝘀𝗶𝗼𝗻𝘀:   𝟭. 𝗥𝗲𝘃𝗶𝗲𝘄 𝗖𝘂𝗿𝗿𝗲𝗻𝘁 𝗕𝘂𝗱𝗴𝗲𝘁 𝗣𝗲𝗿𝗳𝗼𝗿𝗺𝗮𝗻𝗰𝗲: Assess the project's financial performance against the initial budget. Identify any discrepancies happened during this year and list the reasons behind them as lessons learned.    𝟮. 𝗙𝗼𝗿𝗲𝗰𝗮𝘀𝘁 𝗙𝘂𝘁𝘂𝗿𝗲 𝗖𝗼𝘀𝘁𝘀: Based on current trends and upcoming project phases, forecast your future expenses. Consider any potential cost increases or new requirements.   𝟯. 𝗘𝘃𝗮𝗹𝘂𝗮𝘁𝗲 𝗖𝗼𝘀𝘁 𝗦𝗮𝘃𝗶𝗻𝗴𝘀: Look for areas where costs have been lower than expected. Determine if these savings can be reallocated to cover other expenses.   𝟰. 𝗜𝗱𝗲𝗻𝘁𝗶𝗳𝘆 𝗨𝗻𝗳𝗼𝗿𝗲𝘀𝗲𝗲𝗻 𝗖𝗼𝘀𝘁𝘀: Review any unexpected costs that have arisen during the year. Adjust your budget to accommodate these expenses and plan for similar contingencies in the future.   𝟱. 𝗔𝗱𝗷𝘂𝘀𝘁 𝗖𝗼𝗻𝘁𝗶𝗻𝗴𝗲𝗻𝗰𝘆 𝗙𝘂𝗻𝗱𝘀: Reevaluate your contingency and management reserves based on this year's experiences. Ensure that you have sufficient funds to cover any unforeseen risks in the coming year.   𝟲. 𝗜𝗺𝗽𝗹𝗲𝗺𝗲𝗻𝘁 𝗥𝗶𝘀𝗸 𝗥𝗲𝘀𝗽𝗼𝗻𝘀𝗲 𝗣𝗹𝗮𝗻: Introduce innovative risk plans which can be done by renegotiating contracts, selecting new vendors, or adopting different method of construction.      -- 𝗕𝗲𝗻𝗲𝗳𝗶𝘁𝘀 𝗼𝗳 𝗬𝗲𝗮𝗿-𝗘𝗻𝗱 𝗕𝘂𝗱𝗴𝗲𝘁 𝗥𝗲𝘃𝗶𝘀𝗶𝗼𝗻𝘀: 𝗔- 𝗜𝗺𝗽𝗿𝗼𝘃𝗲𝗱 𝗖𝗼𝘀𝘁 𝗖𝗼𝗻𝘁𝗿𝗼𝗹: Better control over project costs leads to smooth performance and better forecasting. 𝗕- 𝗥𝗶𝘀𝗸 𝗠𝗶𝘁𝗶𝗴𝗮𝘁𝗶𝗼𝗻: Adjusting budgets to reflect actual costs and unforeseen expenses helps mitigate financial risks. 𝗖- 𝗘𝗻𝗵𝗮𝗻𝗰𝗲𝗱 𝗣𝗿𝗼𝗷𝗲𝗰𝘁 𝗣𝗹𝗮𝗻𝗻𝗶𝗻𝗴: Updated budget revisions enable more precise project planning and resource allocation. #risk #riskmanagement #riskmanager #construction #planning #planningmanager #cost #costmanager #saudi #saudiarabia #ksa #projectcontrols #projectmanagement #amrhegazy