C.S. Lewis authored the often quoted saying that “two heads are better than one.” Why? “[N]ot because either is infallible,” the British writer said, “but because they are unlikely to go wrong in the same direction.” Of course, Lewis wasn’t referring to marketing strategy, but the quotation proves an apt concept in this space, particularly when it comes to effective budgeting.
Although your marketing and finance teams need the freedom to create and manage their budgets according to their own points of view, their end goal is the same: the visualization of marketing’s ROI. When you enable that freedom but also support tight integration between the two - i.e., when they are able to put their heads together - you have an easier path toward reaching that paramount end goal.
Marketing vs. Finance
Marketing should not be constrained by finance, and vice versa. On the marketing side, you need to be able to “project manage” your budget the way you go to market: top-down and bottom-up, usually according to some established campaign hierarchy. Generally, as defined by Forrester, your marketing budget can be allocated across four areas: programs (e.g., events, content delivery, PR or content creation); personnel; systems/tools (e.g., data intelligence programs or cloud applications); and outsourced services (e.g., systems integrators or third-party consulting).
In a similar way, on the finance side, you need to be able to build out your budget based on a general ledger hierarchy: the way your finance team reports to management. After entering your budget top-down – centered on, for example, cost centers and GL codes – you will be able to easily see how this doesn’t align to a program hierarchy, which is more project-oriented.
Get in sync
Different strokes for different folks; however, working entirely independently of one another will only lead to trouble down the road: e.g., coming in at the end of the quarter under or over budget. To avoid this, the two budget hierarchies – although made separately according to each team’s needs – must be kept in sync.
To do this, once marketers have built their budget, entered their planned costs, and seen how it all lines up with their goals and strategies, they need to associate the tactical elements of their plan to the budget hierarchy prescribed by finance, enabling them to stay in line with how finance needs to see the information.
Think of the finance team as holding buckets of money, and in each bucket, the money is a different color. Marketers will come along and take money from various buckets to create plans that are designed to meet their needs. Marketers want to judge their success by the performance of the plans, while finance wants to look at the performance of the buckets. This not only allows marketers to have spending insight into their campaigns but also ensures finance’s needs are met. Both the marketer and the accountant need to see the plan and the performance from their own perspective.
Once you add in actual spending to compare to both your planned costs and budgets at the same time, you will be able to associate spending to your marketing activities, as well as map to those financial buckets that your colleagues need to see. In the end, you’re able to access deeper insights, calculate ROI more accurately and adapt your plans based on the results you see.
Marketing and finance need to be sure they're seeing the same data and that everything adds up as it should, even if they have different points of view.
Have any of your own marketing budgeting tips (or horror stories)? Comment below!