Budget Negotiations & Strategies

by George N. Root III; Updated September 26, 2017

Budget negotiations can be a contentious but productive time in a company's year. They are contentious because each department feels that its should be the budget approved in its entirety. They are productive because a company can learn how to work more harmoniously when each departmental manager understands the needs and requirements of each department. Each departmental manager needs to develop a budget negotiation strategy to get what she needs for the coming year.

Economic Impact

Final budget decisions are made based on how each item will affect the company's bottom line. When you enter into a budget negotiation, bring the basics that you will need for the coming year including existing personnel costs, necessary expense items such as travel and overhead costs such as office supplies. But when it comes time for negotiating extra items such as salary increases, hiring new personnel or increasing the departmental travel budget; you will need good information to get them approved. For budget items such as personnel pay increases, develop an analysis of how each employee's productivity has increased profit. When you are looking for budget items such as an increase in the travel budget, then prepare a report showing how increased travel will help the company bottom line. If you can back up your budget items with numbers that show the value to the company, you stand a better chance of getting your items approved.

Extrapolation

One way of winning votes in a budget negotiation is to extrapolate costs and benefits over the course of time. For example, if you are trying to get an increase in your personnel budget of $100,000 to hire more people, show how the productivity of the new personnel will add profit over the course of the next five years. Compare that increase in profit to personnel costs to show a benefit to the company. When you can show an extended benefit to the company versus focusing on short-term gains, it helps company executives see the full scope of the gains you are proposing.

Compromise

Go into your budget negotiations prepared to compromise. Other departmental managers will try to negotiate your budget needs down or out in lieu of their needs. To help you get what you want, begin your budget negotiations by asking for more than you need. Ask for a 20 percent increase over what you need, and be prepared to be negotiated down. This will help you get close to the budget numbers you are looking for and it may even help you get approved for more than you had planned.

Common Goal

Unfortunately, the reality of a budget negotiation is that it pits departmental managers for the same company against each other. Part of getting what you need in a budget negotiation is remembering, and reminding the other managers, that you are all working toward the common goal of success for the company. Work with the other managers to develop a dynamic budget that gives up money in some areas but increases in other for the benefit of the company. For example, if departmental managers agreed to lower their budget needs to new personnel, then that money can be applied to better benefits and increased salaries for existing employees. This reduces turnover and helps company productivity by maintaining the existing staff.

About the Author

George N. Root III began writing professionally in 1985. His publishing credits include a weekly column in the "Lockport Union Sun and Journal" along with the "Spectrum," the "Niagara Falls Gazette," "Tonawanda News," "Watertown Daily News" and the "Buffalo News." Root has a Bachelor of Arts in English from the State University of New York, Buffalo.

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