Are You Over or Under? And No, I Don't Mean Blackjack
Over or Under? Ah yes, how I wish I was talking about a great trip to Vegas, where I watched my stack of chips get taller as I sipped a martini and shot for the perfect 21. That would be a pleasant memory and a fun topic (the martini alone brings a smile to my face). However, the purpose of this blog is not to discuss over/under strategies for your blackjack game, it is to discuss the thorn in the side of most clinical study and program managers: the tracking and reporting of your budget.
Let's be honest - everyone has been in the hot seat at the monthly Finance meeting. If you are over budget, Finance will drill you with questions as you seek approval for yet another budget increase. If you are always over-forecasting and significantly under budget, Finance will communicate their frustrations because you're holding dollars that could have been spent on other activities. If your budget is swinging under one month, over the next, then you're the ultimate offender. Your finance department has to justify those swings to Senior Management, and if you’re in a public company, the auditors. Keep in mind that such swings are a sign that tracking of forecasts or accruals is not being done with accuracy or confidence.
There are ways to reduce the pain points without engaging in a complete overhaul of your financial system. Start by asking yourself the following questions:
- Are you and Finance speaking the same language? This is the starting point toward effective communication and making the budget process more collaborative. For example, as a project manager, you should know how Finance defines accrual and what your responsibility is in supporting tracking it. It should be clear that accruals are how Finance takes expense on your studies, and that this is driven by estimated work completion and not invoicing. There should be no mystery behind Finance’s information requests or how they use the information you provide. Also, not all Finance professionals have been exposed to clinical trials. You want to ensure Finance understands how a trial is run and what factors drive the budget up or down. Cross-education should be a priority.
- Are you clear on who “owns” particular information and reporting? Mapping out roles and responsibilities will eliminate redundant data housing and provide clarity around required communications. An effective rule of thumb: Clinical stays on top of budget and actuals; Finance manages the accruals. Avoid keeping multiple trackers of the same information. You do not want to spend all of your “spare” time rectifying disconnects cross-functionally. Misalignment in tracking will eventually lead to errors in reporting, especially when there are too many involved in the monthly forecasting process.
- Are you communicating up AND down? This is another situation we’ve all been in. Leadership and Program Managers know the forecasts and accruals, yet the folks managing the studies may not. Or study managers are keeping a tight budget but this information is not being shared effectively by the leaders that sit in the Finance meetings. Broken communication chains can cause confusion and ultimately result in a budget that is not being managed, forecasted, or reported accurately.
- Lastly, do not forget to ask yourself - are your tools archaic? I cannot emphasize this enough – BUILD SOLID TOOLS. Do you utilize a standard tracker across programs? Can you easily track and manage your budget to actual? Can you efficiently track actuals and work completion against Purchase Orders? If your current tracking and reporting process seems cumbersome and excessively manual, you need to reevaluate your tools. Always remember your vendors have reporting capabilities as well – leveraging this can help minimize your manual tracking or assist with validating your internal data.
Every organization is different and the above answers to these questions can vary greatly. At the end of the day, you want a budget process in place that is efficient, scalable, and that does not keep you up all night with your head in a spreadsheet. Staying up all night in Vegas playing blackjack is OK; staying up all night crunching numbers and fearing tomorrow’s Finance meeting is not. You truly can change always being over or under; it’s just a matter of asking yourself some important questions and collaborating with your team toward positive change.