Crunching the Numbers

It’s the month, more often than not, when the annual budget is put together for most companies. It’s a necessary evil for some and a hopeful look to the future for others. Either way, it’s a process that consumes hours upon hours of number crunching, tweaking and tough decisions.

Scott Brothers, president of Joplin-based The Insurancenter, the largest insurer of car washes in the U.S., said the process for his company starts in September with a goal of having the budget in order by the end of October.

“I’ve been doing it a really long time,” he said. “You have to crunch and tweak the numbers, and you want to start early and see it all the way through. It’s important, though, because you use the budget as a road map.”

Brothers said the secret to creating a working budget is in setting target dates and meeting those deadlines. He said that requires cooperation from all department heads of any business. For a multi-million dollar company like The Insurancenter that’s a process that involves about seven different people at any given time.

For a $300 million health care provider like St. John’s Regional Medical Center, that’s a process that involves hundreds of people and months of work.

“It’s a pretty sophisticated process,” said Dennis Wilson, interim chief financial officer at St. John’s. “We have some very sophisticated tools for budgeting. It’s a fairly lengthy process that involves all directors and vice presidents in the organization, and anybody who manages or directs a division or program. We also are part of the Catholic Health Initiatives, so our budget is rolled into one that is bigger than ourselves. There are a fairly large number of people involved.”

Mike Landis, a small business owner and board member for the Joplin R-8 School District, likened the budget-building process for the school district to a company similar to the size of St. John’s. He said managing a budget that extensive requires almost every board meeting throughout the year to have an item on the agenda concerning the budget. He said compared to the budget-building process that takes place with his Landis Construction company, the school district takes much more work.

“It’s a $93 million budget with 1,200 employees,” Landis said. “That takes a lot of work. Compared to (Landis Construction’s) $4 or $5 million budget it’s quite a chore.”

Landis said the nature of his construction company is such that it allows for a lot of fluctuation in budget building. He said generally he takes into account revenues and expenses from the year before and compares them to the current year in order to plan ahead for the year to come.

“Periodically through the year we’ll have more than we planned for and we’ll be able to pick what we want to do to help the community,” Landis said. “That includes little things like golf hole sponsors, or our big event like the extreme home makeover.”

Landis said there were quite a few other businesses in the community that donated time and money to the extreme home makeover, and that for many of those companies those extra funds were planned ahead for in the budget.

Paul Baldassarre, manager of Meek’s — one of the local businesses that participated in the extreme home makeover — said he won’t start planning his budget for another month or two, and that a lot of his decisions are made for him by the corporate side of the business.

“It’s a lot of fun,” Baldassarre said sarcastically of the budget-building process. “We have 30 stores, and I have a bookkeeper here, but there are several accountants at corporate to help with the budget. It can get pretty tedious.”

Baldassarre said funds for charitable giving to the community comes out of an allocated advertising budget line item, though supplies and surplus product that might be donated to organizations in the community aren’t reflected on the budget but rather on the bottom line of sales.

Brothers, who also has a line item for charitable giving, said adding and subtracting line items on a budget is usually what takes the longest time, and that’s why his company, as well as many others, start four or five months ahead.

“We start in September with the goal for a preliminary budget by Oct. 1,” he said. “It’s definitely an extensive project to try to compare where your current line items end up and what your expenses are for the year, and then project how that will affect the next year. And our business is affected by the market so a lot of that fluctuates.”

Brothers and Landis both said their companies usually start the budget-building process by looking at the previous year and taking line items that are continuous from year-to-year and making those decisions early on in the process. Brothers said it’s not until mid-November that a lot of the fine tweaking really starts to take place.

“The first time or two I went through the budget process we maybe had it done by the end of December,” Brothers said. “Now, we pretty much have it set by October and might tweak it a time or two in November.”

As with most companies, Brothers said personnel and payroll is usually the highest line-item amount. That is followed closely by information technology. Brothers said his company replaces about a third of its technology equipment — mostly computers — each year. Many companies follow suit, such as St. John’s. According to Wilson, St. John’s always budgets a large amount for technology advancement.

“Payroll and benefits account for about 45 percent of the total expenses,” Wilson said. “Next is resources and supplies, and technology is a major factor there. We need to try to be competitive and provide our patients with the things that they expect from a health provider of our size, and technology is a major factor there.”

Wilson said ultimately it’s not about staying ahead of the curve in the field, or making wage rates competitive to others in the nation — it’s about satisfaction of customers, or patients in the case of the hospital.

“The patients we serve are the main driver for our budget,” Wilson said. “The volumes and revenues that they generate gets brought back to a departmental level and we determine how to better serve those patients.”[[In-content Ad]]