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Eight Questions To Help Finalize Your 2024 Budget

Back-to-school season is typically the time when executives at financial institutions get serious about their budgets for the coming year.

Budgeting is such a powerful exercise that it’s been described as the only true way to make sure your organization isn’t flying blind. Even though leaders understand why budgeting matters, the majority (fifty-seven percent) of senior executives in a recent McKinsey survey said that they were dissatisfied with their level of visibility into general and administrative (G&A) spending.

If you want to do budgeting right, the exercise needs to be approached with some care and forethought. Here are a few questions worth considering:

Is your budgeting process built around strategic goals?

Too often, last year’s budget becomes a template for next year’s budget, even when priorities have shifted.

In the McKinsey survey of senior executives, nearly half of respondents said that at least one-quarter of their organizations’ G&A spend was invested in the wrong areas relative to business strategy.

To prevent dedicating money to second-tier priorities, think of creating a budget as an opportunity to start with a blank sheet of paper. Start by asking what goals your CEO and board members have named for the coming year. Whether it’s acquiring more customers or moving into a new geographical footprint, their goals should be front and center in your future spending plans.

Next, ask yourself how much money will be needed to make these goals a reality. If, for instance, a goal will require new hires, investigate whether there are other less expensive options out there. Instead of adding staff, is there a software solution that could make your existing employees more efficient?

Have you identified your top-ten expense lines?

When it comes to designing a budget, the biggest expenses are usually where to devote the lion’s share of energy.

In a 2022 report by KPMG International, "New Cost Imperatives in Banking," 61 percent of 200 bank executives surveyed said that cost reduction has become a higher priority since the pandemic. Remember that it’s often easiest to make a sizable financial dent in your large expense lines.

Is your definition of “bang for your buck” broad enough?

Too often, community banks and credit unions convince themselves that bringing in new revenue is the only game in town.

Generating revenue is great, of course, but it’s also important to minimize risk. Compliance may not seem sexy, but strong compliance is what keeps your bank or credit union from incurring pesky regulatory fines that damage the bottom line and your reputation.

Are your managers equipped with accurate historical information before they make spending requests?

It’s not unusual for branch managers or the heads of IT or compliance to make a large “ask” in next year’s budget.

Being ambitious is fine, but it’s important that requests from various divisions are realistic, too. One way to rein in wild requests is to make available historical data so your executives can compare last year’s actual expenses to proposed budgetary requests.

How are you managing the hiring process going forward?

For some financial institutions, meeting future goals will mean hiring new employees. Given that headcount is an enormous part of any financial institution’s budget, thinking how to accomplish goals with the trimmest staff possible is critical.

At times, financial institutions will see headcount as an opportunity for cost-savings. Community banks and credit unions hate to engage in layoffs, but some will find themselves reining in employee overhead by initiating hiring freezes or offering incentives for early retirement.

For banks or credit unions that need additional expertise in a particular area, there are an increasing array of alternatives. One possibility is gaining specific expertise by outsourcing to an external expert. Another is investing in new software, rather than hiring an individual who will draw a salary for many years to come.

Are you on top of vendor management?

Many bankers find themselves in the embarrassing position of having misplaced their master service agreements for some of their current vendors. Others overspend because their vendor contracts are set to auto-renew and they don’t take the time to ensure that the pricing and services continue to make sense.

Budgeting season is a terrific opportunity to ask whether you have an effective vendor management system in place and are taking full advantage of the contracts you already have.

What processes do you have for eliminating redundancies?

Every company has them: products or people that are duplicating efforts.

On the software side, now may be an excellent time to review your list of products and make sure that you’re using the full complement of services you’ve paid for. One example of an area where duplication often occurs is e-signatures. Many core vendors provide an e-signature feature while other software packages may add e-signature charges, as well.

Is now the time to jettison the “annual” budget?

At many financial institutions, the annual budget calendar is a time-honored tradition. However, some banking executives have begun to view financial planning more dynamically and are pushing to revisit the budget on an ongoing basis.

With so many “unknown unknowns” out there, some of the savviest bank and credit union executives are making budgeting a near-continuous exercise so they can be responsive to a changing environment.


Need help building your budget and aligning your BSA program with 2024 growth goals? We can help! Reach out and we'll help you prepare for success in the new year.


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