Budgeting Interview

This week, we had to conduct a budgeting interview.  I chose to interview an individual that is in charge of business operations and finances at a small electronic hardware company.  His name is Steven and he is also co-owner.  My team came up with the following questions for our interview:

1. What is the most difficult aspect of budgeting?

Taking the time to do it.  Doing a budget isn’t rocket science, he said. It is merely creating something and sticking to it.  He said they weren’t very good at it when they first started about 12 years ago, but they have gotten to where it doesn’t take nearly the same amount of time as it used to. 

2. What areas of the budget are the first to be affected when making cuts?

He said that there are standard costs that have to be done every month, such as required supplies, rent, utilities, and salaries.  The first things that get cut are marketing expenses, part-time employee hours, and the owners pay. 

3. What do you enjoy most about creating a budget?

He says that he is a self-proclaimed nerd.  The thing he enjoys the most is the numbers and the spreadsheets.  He said that it sounds dumb, but it still gets him excited to make a new budget.  Also, when he sees how well they are doing, it makes him happy. 

4. How much flexibility do you allow in your budget?

Steven said that this question depended on the definition of flexibility.  If it means to spend more than what is budgeted, then no flexibility.  If it means that midway through the year, the budget can be altered to for something specific following a meeting of those that need to be involved, then there can be a lot of flexibility.  As long as the individuals who oversee the spending and budgeting are aware of the changes that need to be made, then it is important to feel free to make changes as they arise so as to always be working with the best information. 

5. What are your feelings on making annual budgets widely available for publicly traded companies?

They are a pretty small outfit, so he didn’t really know much in terms of that.  He and his business partner have talked about making their budget known to the staff of their employees, but they chose not to, as it wasn’t really necessary.  Also, each department knows what they have to work with within the budget and can always requisition for changes. 

6. How many previous years’ budgets weigh into the decisions for the current year's budget?

Definitely 1 year, and sometimes it is good to look another year or so for comparison.  It is good to see where things were, so that plans can be made in terms of expectations.  It is also important to take into account all of the reasons for the budget and year doing what they did in the past. 

7. How accurate do you budget; do you budget down to the penny or do you tend to be more liberal with your budget?

He said that they place a cushion in most areas, but that cushion has gotten smaller and smaller the better they get at budgeting.  It isn’t down to exact pennies in the budget unless it is an expense that never changes.  The budget is round numbers based on information gathered and then the actually spending is obviously tracked to the exact penny. 

8. How does going over the budget affect you or your team?

Steven said that going over the budget is not an option.  Aside from the first few months in business when they were working out the kinks in the budget, they have never gone over budget and it is because that is a priority that was made a long time ago. 

9. How much influence do you have on your budget versus getting it handed down to you from corporate?

He and his partner have full decision making abilities in regard to the budget since they are the highest up that it goes.  They do not have a corporate entity to answer to. 

10. How would you change corporate’s budgeting style?

As he is a small business, this question didn’t apply to him.  There isn’t a corporate to report to. 

11. What do you do when you go over your budget?

They have a once a month budget planning meeting and a once a year meeting to look at previous months and years and make decisions based on current business and projects that are in the works.  They also look at marketing and planning for the future.  They will also hold a special meeting as needed to make any changes to the current budget if there is a need expressed to do so. 

12. What does corporate do when you go over your budget?

As they are a small operation, this question did not apply to him or his business. 

13. Has the budget ever been so restrictive that it prevented you from doing the job properly?

He doesn’t feel that a budget is restrictive.  It is more freeing.  It is what allows you to do things, because it has been budgeted to do that thing, whatever it might be. 

14. How important is staying in the budget?

One of the most important things about running a small business is being able to stay within a budget.  His estimation is that not staying in the budget is probably one of the top reasons a company will go out of business. 

15. What are some things in your budget that may not typically be thought of as important to include in a budget?

He initially said toilet paper in jest, but said that if money is going to be spent on something then it is important and needs to be included in the budget.

From this interview I learned that there is a lot that goes into budgets.  I discovered that I don't want to work in the budget department.  There is too much pressure to make sure the money is going to all the sources that it needs to be going.  I get a headache just from figure out my own personal budget.  I respect the people that do work with budgets though.