Last week we ran an online introduction to energy budgeting called Energy Budget Planning: 3 Insights Every Manager Should Have.
During the 30 minute course, we discussed the key challenges that all managers face when planning their energy budgets. Issues like: time constraints, lack of access to data, management expectations. In addition, we described the importance of putting a repeatable, manageable process in place. We went on to describe the key steps in an effective budget process:
- Forecast usage
- Forecast unit rates based on best available data
- Determine monthly and annual costs in $
- Identify potential variances (high/low)
- Make assumptions clear
- Track your actual costs to your forecasted costs
Benefits of an energy budgeting process
When a process is in place and followed, budgeting does not have to be a headache. In fact, energy budgeting can bring significant benefits to an organization– delivering insights and information that allow managers to identify energy saving opportunities and other ways to avoid costs. We discuss the value of the budget process in another article titled Energy Cost Management: The Unexpected Benefit of Budgets. Without a manageable system that permits managers the time to review and analyze trends, then energy budgeting just feels like jumping through management hoops to meet commitments that can be extremely challenging.
3 Insights Every Manager Should Have
We also provided 3 insights that every manager who works on a budget should have. They are:
- Insight #1: Set up a process. Take extra time to ensure the process works. It won’t just make budget planning easier, it will improve business outcomes, result in lower costs and a better result. Or, as Yogi Berra would say: “If you don’t know where you are going, you’ll end up someplace else.”
- Insight # 2: Be prepared for uncertainty. Last year is not a good estimate of what will happen next year. Don’t rely on last year’s numbers.
- Insight # 3: Narrow your focus. Once you see your budget information clearly, you will realize that there are only a few months of the year that drive the majority of your organization’s costs. Focus on those months and you’ll see meaningful results.
Finally, at the end of the course, we provided examples of reports and formats for effective budgets.
Bottom line for energy cost managers and finance professionals: Energy and utilities budgeting doesn’t have to be painful. It can be productive and insightful. Once you invest in a good energy budget planning process, it will pay off in better control over costs and less time to manage the process.
If you need help with your budget planning, or want to review your expected costs with us. Let us know.