Training Budgets Step-by-Step

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The right employee training can often mean the difference between sinking and soaring when it comes to meeting your business goals and projections for the year. Employees who understand your expectations and how they need to be met in order to meet goals are likely to feel more confident than employees who are guessing and throwing spaghetti against the wall to see what sticks.

Learn to create an accurate training budget plan and empower your employees to be at their best without overspending and backing your organization into a financial corner.

Training Budget Explained

A good training budget definition is comprehensive, includes all costs related to training and acts as a road map for how funds should be used for training throughout the year. This helps ensure that you get the most bang for your buck and do not end up overspending on fancy lunches or dinners while not providing the best possible trainers and materials.

Your training budget fits into the overall budget of your organization and should typically comprise only 1 to 5 percent of your overall expenditures on salary. A simple web search for training program budget examples will help you see what most companies in your industry include as important expenses.

Training Budget Development

Training budget development involves communicating with the heads of every major department in your organization. Make sure to ask important questions like:

  • Where do you see gaps in training?
  • On what areas of training do you spend the most time?
  • How often do you meet for training and with whom?
  • How can we improve our training program?

The answers to these questions will help you assess your current training program in order to make a plan for strengthening it going forward. Perhaps weekly training calls are not producing much fruit, but a quarterly company training day in a large company-owned conference room would pack more bang for the buck with a lower per-head cost.

Maybe your managers are spending too much money on a large catered meal when that money would be better allocated toward securing a well-known speaker to train your workers. Instead of you supplying the entire meal, your workers could bring a bag lunch while you supply the beverages. The small sacrifice would be well worth the higher caliber training.

Considering the Costs

With a general idea of your current training costs in mind as well as how you would like to change your training initiatives, it is time to consider the budget in more detail. Look at how much you are spending on salaries to determine how much of your overall budget is available for training. For instance, if you spend $500,000 on salaries per year and stay within the 1 to 5 percent range for training, your training budget could range from $5,000 to $25,000 per year, which is a pretty wide range.

If you can afford the full $25,000 training budget, consider creating a budget for a bit less than that in order to give yourself some financial wiggle room. Keep in mind where you want to spend the most money on training:

  • New hires just learning job skills and protocols
  • New skills training for existing employees moving into new positions
  • New systems training for all employees
  • Upper management who can pass on knowledge without additional cost

When considering expenses to be included in your company's training budget plan, make sure to consider every detail, including:

  • Manuals, brochures and other training materials
  • Lodging
  • Travel and mileage expenses
  • Instructional and outreach materials
  • Postage
  • Office or space rental
  • Equipment costs
  • Internet and communications needs
  • Conferences
  • Research

Drafting a Training Budget Plan

The answer to a better training program is not an ever-expanding budget but rather a budget well used. According to Capterra, half of your overall training budget should be used for high-caliber training staff to teach your employees. Another 25 percent should be allocated toward training tools and technologies, while only 20 percent is needed for training content and 5 percent for miscellaneous items like food and drinks. A basic training budget sample for a company with a $22,000 training budget would look like this:

  • Training staff, including travel and meals: $11,000
  • Training tools and technology: $5,500
  • Training Content: $4,400
  • Miscellaneous: $1,100

Each broad category of your budget can be broken down further into subcategories. For instance, a training budget sample for the staff category might look like this:

  • Training staff honorarium: $8,000
  • Training staff lodging: $800
  • Training staff meals: $500
  • Training staff travel expenses: $1,700

For every category in your training budget sample, compare receipts from past years and strategically plan with your team about how you can reduce or increase costs in order to better your program. Get everyone's input on your initial draft and allow adequate time for edits to be made back and forth between departments. At the same time, set a deadline for when the training budget needs to be finalized.

Finalizing the Training Budget

When you are ready to finalize the training budget, your team needs to check and double check the numbers to make sure they line up. Have your accountant run the numbers again to make sure you are on the right track. If budgeting has been a major concern for you in the past, contracted consultants can also review your final budgets and help you make adjustments before it is set in stone.

If your organization has a board of directors, they will also need to approve your projected spending. Before you show them the final product, make sure to have a professional presentation of the numbers. Your accountant likely has software that can do this for you through a spreadsheet program. However, you can also look at other training program budget examples to see how other companies have done it.

Your finalized training budget will be stored within the overall budget of the organization. A good accounting program will make department heads aware of how much money has been spent for the year and what remains for their use.

Reducing Your Training Budget

You might encounter a bit of sticker shock during the process of drafting a formal training budget. As you look at other training program budget examples, you might see that your company is overspending on certain budget items when compared with other companies. You might begin following your budget but get off track during the year and need to cut corners. Here are some ways you can reduce your training costs while still adequately preparing your employees for high performance:

  • Use your own office space instead of rented space.
  • Use digital materials instead of printed materials.
  • Offer webinars instead of conferences.
  • Make use of apps for training new protocols.
  • Start a mentoring program to train new employees and managers.
  • Cut down on miscellaneous expenses like food and beverages.
  • Offer one large, in-person training instead of multiple smaller training events. 
  • Create internal trainers who are already salaried. 

Your own internal surveys and performance statistics should be able to guide you to which of these training options is best for your company and industry. For instance, engineers might be able to do most of their training online, while the construction crew needs hands-on training in the field. The product development department could get a lot out of webinars, while sales associates need mentors to grow in confidence.