Dilemma

Should you have 3 budgets?

Written by Sverre Steensen | Nov 26, 2023 3:02:35 PM

Why on earth have you reduced our revenues by what appears to be 15% and our results by 25%?” You look at your CFO in disbelief. He meets my gaze steadily. "In the bank meeting on Friday, it's crucial to be cautious," he explains. "By scaling back revenue projections and incorporating multiple cost buffers, we will overperform. Banks hate unpredictability, and with this budget, we will secure the credit line and avoid surprises."

 So you´re saying we should have 2 budgets next year?” You say, shaking your head. “No, not 2, I´m planning to make 3. One for the bank, the most conservative one, one for the management team that is the most aggressive, and finally one for the board, that is right in the middle.

 You hired a CFO to take it to the next level, but this seems too excessive. “This makes no sense to me. Everyone knows that whatever happens, you never hit the budget 100%. You either go over or under. That is just business. I believe we should have one budget and hold everyone accountable to it.” "This is very naïve,” ehm, your CFO clears his throat when you raise your eyebrows, “or unusual, compared to what I´m used to, but it´s your call.”

You are the CEO – what would you do?