By September 15, 2010 0 Comments Read More →

Look at the Big Picture but Don’t Miss The Details

Look at the Big Picture but Don’t Miss The Details

I found a major budget error that nobody noticed until I arrived at a new job and started breaking my multi-milllion dollar P&L budget apart and reporting it based on different segments. Everyone else was only looking at the big picture and missed the details.

The capability was there, but our accounting folks as well as my predecessor and my new operations staff didn't see the need to separate it by area manager and between ongoing contracts and what we called 'extras' from the ongoing contracts.

I think it's because the results were very good and it was the start of the fiscal year. Then, a months after I joined, I started to see the trend. My CFO told me no problem, they know it's an allocation problem with our labour overhead between corporate and my region.

Their explanation sounded logical and they had convinced themselves because they were looking at the large number and it seemed to fit with their numbers. But I wanted to know for sure and to understand it, since I was new to the company. So, I had them create new P&L reports. One for each area manager and one for the extras. I wanted the area managers to be more directly responsible for their results and more actively manage expenses on a contract by contract basis.

What I found stunned me. Our margins were ok, but when I looked at the new P&L for the extras, the budget showed a 100% margin on a $750,000 revenue projection. It seems that the revenues were budgeted, but the expenses were forgotten. In the overall P&L, this huge mistake was hidden until a couple of months went by and as expenses that weren't budgeted started to hit the actuals, the gap widened.

Needless to say, this mistake made what looked like a good year when the budgets were set (before I arrived on the job) into something completely different.

I've always wanted more details and to drive accountability to those who earn revenues or expend costs in a way that's meaningful and allows analysis and action. This was the best example of how important that is. When your CFO, their accounting staff and experienced operations staff miss something like this, you know there's a flaw in the process.

About Michel Theriault

Michel is the founder of Success Fuel for Managers. He is an author, speaker and consultant focusing on topics relevant to Managers and aspiring Managers in businesses of all sizes who want to get results, get attention, and get ahead. He is also a contributor to Forbes and AllBusiness Experts . Michel is available for speaking engagements, training and consulting. Connect with him or send an email.

Posted in: Leadership

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