Budget Templates: Creating Assumption Templates to Optimize Departmental Templates

Previously, I discussed the importance of investing upfront in creating robust budget models to eliminate the need to change the budget template from year to year. By investing the time initially, your end users will only have to enter just two or three drivers into your budget templates and everything else will flow automatically. Your budgeting model should be flexible, repeatable, and straightforward. An essential part of creating robust budget templates is centrally setting assumptions for drivers with global impact.

Your department heads, who, in a decentralized budget process are responsible for their budgets, should not be responsible for costs that are not within their control. Some of those costs are common across departments, if not entire companies, such as employee benefits. While department heads should be responsible for their headcounts and salary levels, they are not responsible for ancillary costs associated with them. These costs should be set centrally and used in calculations on departmental templates. Some examples of employee related and other global cost drivers are:

  • FICA rates and maximums
  • 401(k) contribution rates
  • Health benefits
  • Unemployment taxes, rates and maximums
  • Workers’ compensation
  • Life and disability insurance
  • Auto and other allowances
  • Days in the month
  • Depreciation rates

Insurances can have multiple levels of coverage and/or numerous carriers, and taxes will vary from state to state, so this may be no simple matter. Nonetheless, a well-designed series of budget templates where the assumptions related to fringe benefits and other global items are uploaded from their own template and whose values are then fed into departmental budgets is a model that will work for years to come.

Having said that, let’s keep in mind that budgeting is an exercise in estimating future costs. There is a cost for every assumption, in that it has to be built into the assumption template and then pulled into and used in calculations in the departmental templates. So exercise some common sense. A cost that may be clearly defined, such as a $2 fee per employee, is probably not worth even the one-time cost of setting it up – it’s essentially noise.

If you have questions about creating budget templates or one of our budgeting tools, get in touch with our experts today!

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