As we move towards year-end, many recruitment – and, indeed, general human capital management – businesses will be well into their budgeting process for 2025.

To be clear, a budget process is not merely forecasting the revenues you expect from your teams; rather, it is a spending plan based on income and expenses. A budget is a clear financial plan that outlines expected income and expenses over the coming financial year, broken down into quarters (for most recruitment businesses). It serves as a roadmap for managing your cash – ensuring that financial resources are allocated efficiently to meet all current needs, along with determining at what point cashflow will support your growth ambitions. In its simplest form, a budget helps your business to track income, monitor expenses, plan for investment and achieve financial goals.

Whether it is managing a small team or overseeing a multi-million pound corporate budget, a structured process is essential, for the following reasons:

• Ensures financial discipline – at its very core, a budget process establishes the discipline of clear spending limits. In the absence of a budget, it’s easy to overspend or misallocate resources, with all the financial stress that can bring. A really well-defined process will ensure your business considers income and then prioritises expenditure based on necessity and goals – crucial in maintaining a stable financial position and long-term sustainability.
• A roadmap for financial goals – a budget serves as a financial roadmap and whether you are expanding your business, planning an event or maintaining steady state, the budget allows you to allocate funds towards these objectives. Leaders will be able to direct resources in a way that supports strategic goals, such as expansion, hiring, marketing or research.
• Improve decision making – a robust budget process that lives throughout your financial year enhances decision making by providing real-time financial data. Actual revenue lines vs forecasted inform decision making around investing or hiring. The absence of a budget means money can be spent inefficiently; unplanned or poorly tracked expenses can quickly add up, draining resources and working capital that could be better used elsewhere.
• Accountability & transparency – your budget process plays a vital role in ensuring accountability. It provides a clear record of where capital is being allocated, which can be shared with stakeholders and investors, building trust.
• Performance tracking and monitoring – most importantly, an ongoing budget process allows for the continuing monitoring of financial performance. When the forecasted revenues are not meeting expectation, not only is that the flag to manage expenditure closely, but also the clear message to interrogate activity date and identify the specific performance shortfalls.

In my experience, a more harmonious budget process is one that involves a ‘bottom up’ and ‘top down’ approach. If your teams are going to own their budgets and really believe in their ability to deliver them, then it is paramount that they have a voice in the production of the numbers – revenue and expenses. This approach will offer the different and (hopefully) complementary perspectives on financial planning. Bottom-up budgeting involves gathering input from teams, via their managers, promoting a sense of ownership and the accountability that goes with that. After all, these are the individuals who have a detailed understanding of their markets and their clients. Top-down budgeting, on the other hand, is driven by the senior managers and the board, setting overarching financial targets and strategic goals – ensuring the budget aligns with the company’s broader vision and objectives.

Combining both – involving all the necessary negotiation that is required when a confirmed budget underpins reward! – gives a balanced view that empowers the business into the new financial year.

Tara Ricks is a non-executive director, co-chair of Elite Leaders and director of Consulting Eve