THE IMPORTANCE OF INTELLIGENT BUDGETING

When someone says, “I want to talk to you about the budget,” most people prepare mentally for a nightmare of a discussion.

Here are some suggestions to make the process less stressful:

Get away from last minute planning

Over the years I found that one of the greatest mistakes made in the development of marketing plans is that we don't allow ourselves enough time to plan and budget properly.

I have always encouraged hotels to start planning at a point when you have enough time to look at every aspect of the plan in advance. For example, I remember planning a New Year's Eve package for a hotel in July when we had enough time to think through every aspect of the plan and the budget. After we shifted from last-minute planning to more sensible planning, the return on our marketing investment improved every time, without exception.

Simple rules for budget control

I've seen many marketing executives who never reached their full potential because of a lack of effective budgeting and control of the large amounts of money involved.

Years ago, I realized that we in sales and marketing have very bad reputations as people who know how to spend money but not how to allocate it wisely. In fact, we were referred to sarcastically as the “cocktail division” at one well-known company. This finally got under my skin and I decided at that time that we would build a reputation for excellent budget planning and control.

The following are a few simple rules that helped us:

Base the marketing budget on your strategies/action steps

I noticed that the development of marketing plans at hotels had little to do with the development of the marketing budget. Often the sales department came up with strategies and the auditor developed the marketing budget based on what was spent the year before. We took a different approach. We wrote our strategies/action steps by market segment and, after we agreed that this is what we wanted to do, went through these steps and asked the same question for each step, “How much will this cost?”

Breaking out the budget gives you control

Here's a simple budget control technique I've used for years.

  • Break out budget by same categories as shown in your Budget Statement.

  • Break out each budget category by planned expenses.

  • Establish a reserve within each budget category for charges that surface later.

  • If there isn't enough in an account's reserve for an expense you want to include, determine whether there are planned expenditures that could be eliminated.

  • Another way to free up money is to take reserve money from one budget category to another.

Double check your statement versus approved expenditures

Double check what you approved and ask about anything else that winds up on your statement.

These suggestions all involve good common sense. Come up with your budget rules and enjoy the pride of good planning and budget control.

Tom McCarthy, CHME, CHA, spent half his career with Hilton and Marriott in sales, advertising and public relations and half in his own training and consulting business, Hotel Professional Education and Consulting of Falls Church, VA. He is a past president of Hospitality Sales & Marketing Association International (HSMAI) and is a member of the HSMAI Hall of Fame. He can be reached at ttmccarthy@cox.net or 703-931-0757.

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