Chloe Washington, HubSpot
Planning, budgeting, and marketing performance are links in a chain: when your team builds its marketing plans more strategically, it can budget with greater confidence, accuracy, and efficiency. These pieces are essential to understanding and fine-tuning your overall marketing performance.
But being a budget “owner” is a bit of a misnomer. It isn’t really yours. Marketing may be the ones spending those dollars, but many other stakeholders are involved.
You may be a marketing team lead with ownership over a budget or set of budgets, a marketing operations pro, or a field marketer with responsibility for investments in a specific area. No matter your role, if you’ve got an interest in the best way to manage marketing’s investments, you’ve come to the right place.
All but the smallest marketing organizations have multiple marketing budgets, and the way those budgets are put together have far-reaching implications.
Marketers have been forced to make a lot of changes in 2020, but it’s also opened the door for us to make changes and updates that were previously vetoed. If you find that your marketing budget needs a new structure, this is the time to tackle it. We recommend structuring budgets to mirror the structure of your marketing organization.
Here are a few common approaches:
As a marketer, you’re entrusted to be a good steward of a big chunk of your company’s money. It’s critical to make sure those funds are invested in alignment with company strategic priorities.
Here are two easy tips to ensure you’re spending to strategy:
Set up a tagging system, so that you can tag all spend according to one or more strategic priorities.
Develop an easy way to filter line items so that it’s easier to slice and dice investment data when you need to produce monthly and quarterly reports–or something on the fly.
For multi-national marketing teams, currencies are a major budgeting challenge. Even if your company doesn’t do any international business, there’s a strong likelihood that you’ll have vendors who invoice in a currency other than your home country’s. There are two key issues we can help you avoid.
Different budgets in different currencies can be tricky to manage, but things get really interesting when you have multiple currencies at play within the same budget. It’s essential to track the currency of each individual marketing activity or line item. We recommend rolling up everything to a single master currency across all your global marketing budgets (for example, U.S. dollars) to provide a unified view for marketing leadership.
Having said that, don’t force everyone to plan and budget in the master currency. We recommend allowing marketers to plan and budget in their local currencies. Then, keep the currency conversion process centralized. This approach is faster, less error-prone, and simply more intuitive for regional marketers.
Ensuring the accuracy and consistency of exchange rates can be a time-consuming affair. Issues arise when marketers use inconsistent exchange rates.
Finance departments typically specify the rates to use, so make sure these are communicated promptly to every marketer. Since these rates can change on a monthly or quarterly basis, ensure you have a way of capturing the rate used for each line item at the time of purchase.
You never hear “set it and forget it” when talking about marketing budgets. (And if you do—run!) Here are some tips to help with the day-to-day business of managing a marketing budget.
When you’re able to easily pinpoint the status of any budget, area of spend, or individual line item, you can quickly identify areas where you underspent and overspent. From there, you can identify areas of potential reallocation, and create the biggest possible impact with your marketing budget. So how can you get instant budget visibility? Forecasting!
Even among enterprise marketing organizations, skipping the forecasting step is surprisingly common. It’s essential to have a place to record the information that comes to light when you originally created your plan/budget and when the money gets spent. As soon as a change to the timing or cost of a marketing activity comes to light, update your planned (forecasted) spend. This will give you a holistic picture of what you’re on track to spend versus your budgeted spend.
Tracking forecast changes over the quarter, helps marketers learn to forecast more accurately in the future. In Uptempo, marketers can capture snapshots of their forecasted amounts at a specified point in time. This allows them to compare forecasts at the end of the quarter with the beginning of the quarter.
If you’re using spreadsheets to manage your budget, make sure there’s a way to track all forecasted spend changes. If you only have one row for forecasts, then any updates mean you lose your previous data.
Budgets were meant to be shared, but sharing comes with challenges. When you improve collaboration, you improve your budget workflow.
Spreadsheets are one of the most commonly used tools for marketing budgets, but they simply weren’t designed for collaborative use. Formula errors, version control, and permissions are all potential—and regular—minefields that marketers who use spreadsheets are keenly aware of.
A platform like Uptempo sidesteps these headaches and will save dramatic amounts of time for your marketing team. But no matter what tool you use for marketing budgeting, we recommend having some method of communicating within your budget. For example, leave a note to say why you’ve moved something around, or attach a hyperlink to provide more information about each line item.
Reallocation of funds within the same budget is a big part of the daily workflow of every marketing team. In most organizations, marketers risk losing dollars not spent. Reallocations help you spend to target—in other words, leaving no dollar behind!
If you’re moving money between activities, reallocating funds is normally a simple matter of shifting amounts between cells on a spreadsheet (or better yet, in Uptempo!). Move money at will as long as your quarterly or annual planned spend amounts stay consistent.
For any reallocation, keep two things in mind:
1. Reallocations may affect the balance of your spend; be mindful to maintain your strategic allocation targets.
2. Don’t run afoul of your finance department’s guidelines for reallocations.
It’s helpful to keep a record of all the reallocations that happen throughout the quarter. It can help marketers become more accurate in the future with their bottoms-up plans, while finance, the C-Suite, and your board can use it to improve future top-down allocations.
For marketers in larger organizations, there are many situations that call for transferring funds between separate marketing budgets. And depending on how your budgets are structured, this could represent moving funds between regions, teams, or functional areas.
Budget transfers can be messy and time-consuming, often generating a flurry of emails. Unlike reallocating within the same budget, there’s much more involved. Most organizations have strict procedures to be followed, and errors can lead to double-counting and other financial management headaches.
To ease this burden, some marketing organizations allow marketers to transfer funds between budgets at their discretion, provided the dollar amount is under a certain threshold and a record of the transaction is captured. In order to work, your marketing organization must havestrong tools and processes that can handle budget transfers without triggering manual work. If your company allows budget transfers, but not discretionary trading we recommend advocating for it.
Allowing funds to flow freely among marketing groups will increase collaboration and make the marketing organization more agile as a whole. Groups can collaborate to co-fund activities, and the most successful teams can be rewarded with extra funds to spend.
No marketing budget guide would be complete without advice on navigating the Finance/Marketing relationship. Here are three ways for marketers to ensure a smooth and harmonious relationship with the finance department.
A lot of time can pass between when funds are budgeted and when an invoice arrives at the company’s door. To a finance person, that’s a black hole.
Shed a light into it by communicating the status of your marketing activities. We recommend using a tagging system to let finance see two intermediary steps: committed and occurred. When an activity has been committed, an agreement to spend the money is in place but the invoice may not have arrived. The occurred tag means the activity has happened, whether or not it has yet been invoiced. This kind of visibility will help finance manage cash efficiently and generally keep them happy.
We know this is easier said than done, but the reality is that nobody likes surprises, especially not finance types. One of the many reasons to spend to your targets, is to avoid leaving the finance team scrambling to adjust for a dramatic over- or under-spend.
For many marketers, the reconciliation process can be one of the more daunting parts of the daily budget workflow. We recommend you reconcile early and often. The more frequently you reconcile your actuals, the better handle you’ll have on your progress throughout the quarter. You’ll be able to stay within one or two percent of budget and eliminate end-of-quarter scrambling to spend hastily or shift money around.
Marketing is one of the biggest areas of spend in the entire company, it’s no wonder that the finance department wants to know what those dollars achieved. Even though it’s not strictly required for their job, copy select members of the finance team on some of your marketing performance reports.
We also recommend talking about marketing investments in terms of ROI. Understanding how much marketing contributes to the company’s bottom line will help bring the two departments into closer alignment.
Marketing budgets are not a private affair. Since a surprisingly large number of people across the organization have a stake, sharing and reporting are an integral part of marketing budget operations.
Each of the key players in your marketing organization has a different role and level of responsibility, and these can vary dramatically according to the company. Despite these differences, every marketer will care about three types of metrics when it comes to budgets: quantitative, qualitative, and revenue impact.
How much are we investing? This is the most straightforward type of information to get out of a marketing budget. To show this, you’ll need to compare planned investment amounts with actual dollars spent (over/under).
What are we investing in? As stewards of the company’s marketing spend, it’s critical to demonstrate that your investments are aligned to the top-level priorities of the business. To paint this picture, you’ll need to tag each of your marketing activities in relation to company-wide strategic objectives.
These metrics also come in handy in specific situations. For example, a new competitor might emerge in your industry. Are you spending enough on market intelligence this quarter? For a query like this, you’ll need to report on marketing spend according to activity type, strategic objective or program family.
What are we getting out of our investments? It’s the big question for every marketer: marketing ROI. Getting an answer requires going beyond your marketing budget to link marketing investments to returns.
We’ve put together a sample chart, showing the types of reporting questions that each marketing role would want to answer:
Understanding how to best manage a marketing budget will improve your marketing organization’s performance, help the relationship between marketing and finance, and is a great career-skill to have in your arsenal.
If you’ve been struggling with where to invest your marketing budget, check out our State of Spend Marketing Investment Benchmark Report.
This report is based on aggregate data from the more than $25 billion dollars that global marketing organizations are managing in Uptempo’s platform. We analyzed what happened, identified trends, and are sharing them so all teams can learn from it. Marketers need a roadmap for investing as we look ahead to 2021–this is a guide to help inform those next steps.