“Budget Execution” consists of two articles by Julio Martínez and provides a practical guide on how to effectively manage and execute activities after a budget has been prepared. It emphasizes the importance of execution, accountability, and continuous monitoring to ensure that the company achieves its financial and operational goals.

You can read full articles on Abacum website (1, 2) or download the PDF version from NeoForm’s LinkedIn page.

Below is a detailed summary of the key points and best practices discussed in the document:

1. Introduction: The Importance of Execution

• Problem: The author shares a personal experience where his team missed revenue targets by 40% despite setting clear goals and making “blood oaths” to achieve them. The root cause was a lack of focus on day-to-day execution, with issues such as insufficient outreach, ineffective email campaigns, and stalled customer success efforts.
• Key Insight: In startups and scale-ups, there are many unknowns, but Finance must ensure that teams execute on their plans. Execution is 95% of the work, while planning is only 5%.

2. Driving Insights and Actions on New Targets

It outlines six key steps to ensure effective execution after budgeting:

1. Establish Accountability (The Basics)

• Set Clear Goals: Ensure that each team has crystal-clear targets that are within their control. For example, if a metric like CAC payback is owned by multiple teams, break it down into specific responsibilities.
• Assign Owners: Each target should have a clear owner at the highest level. If ownership is delegated, the leader remains ultimately responsible.
• Shift Ownership When Necessary: During re-forecasting, consider shifting ownership of goals if underlying factors change (e.g., moving retention goals from Customer Success to Product).
• Enforce Accountability: The CEO must enforce accountability, and Finance should provide objective data to support decision-making.

2. Capture the ‘Input Metrics’ When Making a Plan

• Break Down Key Targets: Deconstruct output metrics (e.g., revenue) into input metrics (e.g., number of outreach emails sent, calls made, etc.).
• Assign Responsibility: Clearly define who is responsible for each input metric.
• Set Weekly Targets: Break tasks into weekly targets to monitor progress effectively.
• Analyze Missed Targets: Avoid generic explanations for missed targets and dig into the root causes (e.g., insufficient training, poor qualification reviews).

3. Measure Metrics Weekly and Loudly

• Systematize Tracking: Ensure that systems feed into a single source for easy tracking of targets and actuals.
• Use Accessible Tools: Use tools that allow employees to drill down into key metrics without overwhelming them.
• Communicate Effectively: Provide information in various formats (charts, written summaries, raw numbers) to cater to different processing styles.
• Celebrate Wins: Recognize and celebrate team achievements to maintain morale and motivation.
• Review Metrics in Meetings: Encourage team leads to review metrics at the start of weekly meetings.

4. Personally Track and Escalate Key Indicators

• Tie KPIs to the Customer Journey: Assign measurable metrics to each stage of the customer journey (e.g., time from sale to onboarding, SQL conversion rates).
• Weekly Review: Spend time each week reviewing key metrics and understanding what drives them.
• Model Scenarios: Use models to show the impact of exceeding or missing targets.
• Listen to Customer Feedback: Regularly review customer insights to stay grounded in real-world performance.

5. Align Incentives to Targets

• Sales Commissions: Include a monthly “activity” kicker in sales commissions to encourage day-to-day activities like outbound calls.
• Customer Success Pay: Reward positive customer interactions, not just upsells or retention.
• Management Bonuses: Tie a significant portion of management bonuses to quarterly results to maintain urgency and focus.

6. Iterate Quickly

• Act Swiftly: Address issues immediately to avoid delays.
• Avoid Perfectionism: Make decisions based on the best available data, even if it’s not perfect.
• Simplify Systems: Use simple tools like spreadsheets or chalkboards if necessary to track key activities.
• Document Learnings: Incorporate lessons learned into future re-forecasts to improve decision-making.

3. Adjusting Reporting Structures After Budgeting

It also discusses the importance of adjusting reporting structures after budgeting, especially when changes are made to data dimensions (e.g., regions, departments, or product categories). Key steps include:

1. Lean into the Dimension Discussion

• Define Dimensions: Clearly define which dimensions (e.g., country, region, department) to track and avoid overcomplicating the structure.
• Align Naming Conventions: Ensure consistent naming across all systems (e.g., “BCN” vs. “Barcelona”).
• Avoid Overcomplication: Resist pressure to create overly complex sub-categories that may need frequent adjustments.

2. Create a Data Dictionary

• Systemize Definitions: Build a master overview of all dimensions in your FP&A system or data warehouse.
• Map Old and New Metrics: Align historical data with new dimensions to ensure consistency.
• Date-Stamp Changes: Include effective dates for changes to enable accurate historical reporting.

3. Update Systems with New Fields and Reporting

• Extract Dimensional Data: Pull dimensions from each system and update reports accordingly.
• Communicate Changes: Provide clear instructions to teams on how to use new dimensions.

4. Test Reporting and Establish Ownership

• Run Financial Reports: Test both old and new dimension setups to ensure accuracy.
• Establish Ownership: Assign responsibility for maintaining and updating master data to the finance team.

4. Conclusion

• Balance Flexibility and Structure: In fast-moving companies, it’s important to balance the need for flexibility with the need for a solid data structure. Changes to dimensions should be made infrequently and executed thoroughly to avoid confusion and inaccuracies in reporting.
• Solidify Data Structure: A well-defined data structure simplifies reporting and aligns teams, but each update requires significant effort across the tech stack.

Key Takeaways

• Execution is Critical: Planning is only the beginning; execution is where the real work happens.
• Accountability is Key: Clear ownership of goals and metrics is essential for success.
• Monitor Input Metrics: Track the actions that drive results, not just the results themselves.
• Communicate Clearly: Use accessible tools and formats to share progress and celebrate wins.
• Align Incentives: Ensure that compensation and bonuses are tied to company goals.
• Iterate Quickly: Be flexible and act swiftly to address issues and improve performance.
• Maintain Data Integrity: Regularly review and update reporting structures to ensure accurate and consistent data.

By following these best practices, companies can improve their chances of achieving their financial and operational goals, even in the face of uncertainty and rapid change.