Building Better Budgets

It’s September and almost everyone is back from vacation. Many of us now face building a budget for the next fiscal year. A task that few people look forward to, and many dread. For some the budget development process consists of what was last years, let’s add X% depending on expected growth or decline or corporate edict. That’s it, process is over. This article is for the rest of you.

Each center is unique and therefore each budget must be tailored to fit the circumstances that each center faces. Experience shows that there are many common elements in every center budget. No single approach to budget development works for every situation. However, there are enough parts in common that everyone can learn from what has worked well elsewhere. Take the best and bend them to your circumstances.

In preparing a budget a few key items are needed: an ‘agreed to’ projection of demand (calls, email, white mail, other work), service level requirements, staff profile and turnover statistics, compensation model (annual increases, merit, risk/reward), upcoming or existing projects defined and expected, capital expenditures for equipment or technology, extras and items unique to the center and its management.

Of these items the first three account for the majority of the effort. Staff account for 65 to 80% of most centers budgets. Staff is where to start since the number of staff needed is a function of the work (demand) to be done. It is a good practice to have senior management regularly agree and sign off on a projection of work in advance of the budget and whenever reality is at variance to the forecast. If this is done and reviewed every three to four months then management will find it hard to argue that this or that is not accounted for in your budget. Since these projection reviews are done outside and independent of the budget process cycle it reduces angst and worry and can be dealt with in a frank, open and objective manner.

These periodic reviews should also include discussions with any departments that influence or generate episodic work. The classic is the sales and marketing departments. Remember to check with the billing, accounting and logistics. Inquire whether or not they have projects, events or circumstances that need to be accounted or prepared for. Remember overestimating what is required is just as bad as underestimating…both are wrong. By asking lots of questions and getting everyone’s input, a consolidated view of what the center can expect, is generated and is more likely to be a robust starting point for building the budget. The objective is to build a budget that adequately accounts for normal business and highlights both growth and other changes with allowances for variation.

Once the demand or work is known, calculate the number of hours needed to do complete the work under the operating parameters achieved over the last year. A caution here, do not fudge this or say we will/might/hope to get better. Project, the future, using actual results. Only where there are exceptional circumstances should you deviate; and if you do ensure that this is surfaced and explained in the budget and projection documents for all to know. Use some of the many calculators out there to project the number of people required to handle the expected work volume by period. Add the hours by period to estimate the total hours of work required to meet the service levels.

Now you have a net number of hours needed to complete the work. Add to this; allowances for: absence; on-going training; vacations; special projects; non-demand based work; overhead and clerical work done in the center. These are either available from accounting or HR. Where possible use actual not estimates. It provides for a more robust budget.

At this point some of you will be asking “How many people do I need?” That is more a function of the configuration of the working and budget models that your organization demands. Call center budgets are best run using a full time equivalent (FTE) versus a headcount model. This helps account for the use of full/part-time, seasonal, contract and other variants that enable optimal staffing to meet the wide variations of demand in call centers. A quick estimate of FTE’s can be made using the total net hours divided by either 1950 or 2000. 1850 accounts for a 37.5 hour week and 2000 weeks for a 40 hour week.

Use the turnover averages for the last two years to estimate the number of new staff likely to be required. Of course if you know or expect to lose staff to the new Wal-Mart or a new call center up the block, you will need gross up those numbers. Calculate the number of training hours, reduced effectiveness and call handling rates (lower resolution rate, higher AHT, etc.,) for new staff for the first few periods, and add hours for the trainers and or reduce supervisory hours available.

At this point you have made a comprehensive calculation of the staff time needed to do the work under normal circumstances. Look at the minimum and maximum loads based on the scenarios provided by the sales, marketing, finance and other contributors or factors influencing of demand. Use these to develop a high and low budget around your “normal” one to present as the draft. This shows how the center will handle the contingencies and their effect on the overall budget and the key factor being of course, staff.

Now add special projects, capital expenditures, provide estimates of changes to the “normal” projection based on project or new equipment being added, when and if these happen. Do this only at the end. All too often budgets are wrecked because we all want to believe that the equipment/project/changes to process/new IT etc will be installed, work perfectly, on schedule, to help us meet our numbers etc. DON”T Count on it. 85% of the time it won’t. Projects will be delayed. Crap happens. Plan for it.

There is an old adage that “Proper Planning Prevents Poor Performance”. A budget is a plan. Other people count on it. It is up to you to provide the most reliable plan that accounts for what you see happening and what you have been asked to provide in terms of service to the customers. By calculating the staff required to achieve the service, by accounting for all the reductions to that capacity, by knowing what service level is required, and by identifying the variables and risks that can impact on the call center you can plan to achieve the goals set out. You can plan for success. Better budgets are the tool. Better planning and communication are the means to meeting and maintaining the service levels everyday of the year.

We would love to hear your thoughts and comments on this article. Please let us know by emailing us at [email protected].

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