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How to Build a Better Bank Budget in 7 Steps

10 min read
Oct 3, 2018

It's October, which means that budgeting season at your financial institution is probably in full swing. In this post, you'll learn 7 tips for creating a better budget for you bank or department. Get ready to learn how to make the most of the budget you have, and get the budget you really want.

business-planning-meetingAs we enter into Q4 of 2018 (I can't believe we're here either), now is the time to begin developing strategies for success in the coming year. For the next few weeks, we'll be focusing on those strategies, so that when January gets here, you're ready. We're starting with the tough stuff: budgets.

Having a realistic, clear, and helpful budget is a critical element of any strategy. Unfortunately, even among bankers, budgeting gets a bad rap. It seems like everyone from the Board and senior leadership to the marketing analysts run into issues with their budget.

Do any of these issues sound familiar to you?

  • That one department that is always over-budget is pushing for an increase - again.
  • An unexpected problem in your department has arisen, but you don't have any money left to address it.
  • You're trying to negotiate for increased salaries for your team, and are having trouble balancing that with the need for additional software.
  • It's halfway through your fiscal year and you're already more than halfway through your budget. (Gulp.)
  • Everyone around you is always talking about how the budget is tight, and you're tired of hearing about it!

Read on to learn 7 best practices that will radically improve your bank or credit union's budgeting strategy in 2019!

Your institution probably already has a budgeting process in place, so we aren't going to focus on how to create one from scratch; however, if that's interesting to you, please let us know in the comments! 

Let's jump right into these tips that will help you re-frame and improve your budget. A little bit of positive change goes a long way!

1. Seek Synergies

community-teamworkIn plain English, synergies are what happens when two entities join forces, and the results are greater than the sum of the parts. A great marriage is an example of synergy. At a financial institution, synergies happen when two or more people, departments, solutions, or processes work as one to deliver greater efficiency and clarity than one could produce alone.

There are many different kinds of synergies in business, including revenue, cost, and financial. While you may have heard of these in the context of mergers and acquisitions, synergies can be found internally, too!

In many cases, the types of synergies you'll be looking for will be cross-functional. Here are some questions you might ask to reveal potential synergies:

  • Can you find a way to leverage the cost that one department or team has to incur to help other departments and teams?
    • A great real-world example of this is when a company that is using Redlining Analytics to identify Redlining risk in its compliance department also leverages the solution to provide market insight to the marketing team. You can learn more about how that really works, in the bank's own words, with this case study.
    • Does your marketing team use a social media monitoring tool to track brand mentions? If so, can you use that insight to identify potential consumer complaints?
  • What insight can one team or individual deliver to help another team or individual solve a problem or answer a question faster?
  • Are there any projects designed to enhance one department that could be slightly expanded to benefit another department much more, too?
  • Is any team or department functioning without collaborating with other teams or departments?

Asking these questions will help reveal opportunities for additional synergies. This impacts your credit union or bank's budget, because it may mean that you get more value out of the same expenditure, or it may reduce the time and energy spent on a certain task or project.

Have you already explored synergies internally? Take it further by considering how your branches can work together to collaborate on goals, share insights, and invest in new solutions collectively. There may be opportunities to collaborate on customer acquisition and cross-sales at the branch level. Learn more of these branch strategy solutions here.

2. Align Your Budget with Your Company's Goals

Most institutions evaluate their budget by department or cost center. The only downside to this approach is that it may overlook how the budgeting process can help to achieve company-wide goals. 

teamwork-pulling-rope-togetherEven if a goal is accounted for in one department's budget, larger goals typically have cross-functional implications. Is everyone on the same page about what it might cost?

For example, if your primary goal is increasing customer acquisition, does you budget support that? Can allocating additional resources in marketing help achieve that, or do you need to consider additional spend in customer relations and support?

If your primary goal is opening a new branch, can your budget accommodate those efforts? 

If your budget is aligned with company goals, it makes it that much easier to understand the "why" behind any expenditure. In addition, asking "why" more often in the budgeting process will get your whole company thinking less about cost and more about value.

It will also help ensure that relationships with new partners and service providers are clear. When they know what your company's goals are, they can help you develop ways to achieve them using the solutions you already have.

Finally, if you have to deny someone a budget request, explaining that their request doesn't align with company goals will help soften the blow. After all, company-wide goals or initiatives are those that the whole company can contribute to and help achieve, and ones that everyone should understand the importance of.

3. Focus on Value

We touched on this above, and will talk about it more in the coming weeks, but its important to keep the idea of "value" central in any budgeting conversation. When we talk about value, we're talking about "bang for your buck." What the most valuable software in your department? At your bank? What about the most valuable asset? What about your most valuable employee?


Think about your website - it's open 24/7 and available to pretty much anyone, anywhere. For many financial institutions, this is one of their most valuable marketing assets. However, lots of financial institutions don't allocate any budget to updating it, modernizing it, or providing more benefits to their customers through it.

When you think about value, you may realize that you've been under-investing in something really beneficial, and over-investing in things that don't really help your company grow.

Value is also important when we think about functions. The function of the compliance conscience at your institution is to protect your company from risk. It can mean the difference between a multi-million dollar penalty or serious reputation damage, and healthy growth. That means that compliance is a hugely valuable effort! That said, compliance is sometimes thought of as a cost center. (If that's the case at your institution, here are some tips for how to convince management that compliance is important.)

A function, software, or employee is only expensive if they aren't delivering on value. If they are, consider it money well-spent. Balancing the value with the cost is the key question at the center of any effective budgeting strategy.

4. Identify Redundancies

Redundancies are the bane of any efficient budget or actionable strategy. While you're probably identifying the obvious redundancies in your day-to-day operations, you may also have redundancies in your budget. 


You may be using two similar softwares that serve much the same benefit. Perhaps each branch has a slightly different suite of software solutions, based mostly on history. Or, you might be using a combination of free and paid solutions simply because some employees have a preference for one, while other employees prefer the other. Begin identifying those issues, and asking more questions to learn why.

This is really about clarifying and simplifying your financial institution's expenditures, not about reducing them, although that is a fortunate side effect. The only kind of "shoestring" I like is fries; if you're on a shoestring budget, identifying and eliminating redundancies is one of the best ways to free up resources and give you more room to maneuver.

Take it further by reviewing the benefits of all the different products and software that you have, and seeing if any of them are delivering the same or similar results. If so, you might have an opportunity to reduce costs just by moving from multiple suppliers to one. It may also help ease the burden of vendor management.

In our branch strategy work, we've seen this happen with ATMs, as well as other products that are typically used at the branch level. You may be able to negotiate better prices with a single supplier rather than maintaining several. 

5. Question Costs

budget-moneyIf you've had a line item on your budget for a few years without really thinking about it, it might be time to ask some questions. You may be paying for things you're no longer using, or maintaining outdated solutions that aren't really delivering value anymore.

Don't be a afraid to really question the costs that are showing up on your balance sheets, or negotiate better plans and rates with your service providers, vendors and partners. 

Are you leasing software like printers or computers? Can you leverage FinTech innovations to save money on older solutions to forever problems? Are you paying for the right number of licenses, or seats, for your software? If one of your vendors is charging you the same or more money every year, are you getting more functionality? (For example, we release product enhancements and updates to Ncontracts at least monthly!) 

If you're focused on Fair Lending and exploring software solutions, we make the case for why it's worth the spend here. Even if Fair Lending isn't a priority right now, you can use some of these ideas in considering any potential expenditure on software. 

6. Consider Non-Monetary Resource Expenditures

While your budget is probably focused on costs, this planning time is perfect for considering non-monetary resource expenditures. Think about things like time spent, number of man hours, and other factors.

What is your department or company spending the most time on? What is causing the most stress, and using the most energy? Are these short-term issues, or longer-term problems? And most importantly, can reconsidering your budget help reduce wasted time and energy? If so, increasing the budget even a little bit may be the key to more efficiency. 

If an individual, team, or department is spending a lot of time manually entering data or building reports, that's a clear sign that there is room for more efficiency. In today's world, software is helping do a lot of this work automatically. If you do identify an area for improvement, try to calculate the cost of that manual work. Then, begin considering any software solutions based on the cost you will be saving, so that you ensure that you're keeping value top-of-mind.


7. Measure Your Success 

Take a note out of the most successful software start-ups' playbooks, and measure to your success. Do you have key performance indicators, or KPIs, established for your departments? If so, you might want to include one or two budget-related KPIs in the normal tracking and reporting processes. 

If you started building your budget with a focus on goals, then you probably know what success looks like in a measurable way.

If you didn't take that approach, you can still measure your success by seeing how costs compare year-over-year, how many departments went over-budget, and how much profit was generated. These kinds of simple measurements will not tell the whole story of your institution's performance, but they will provide valuable insights.

As a caveat, analyzing, measuring, monitoring, and reporting can accidentally take up a lot of time and energy. Don't try to measure everything, just focus on the few metrics that will help you really understand whether you're on the right track.

Ncontracts Viewpoint: The budget is where the rubber really hits the road, and that is not always a welcomed feeling. You're looking to really match your goals to how much it's going to cost to achieve them, and navigate all the challenges of the marketplace today.

We know that compliance tends to be one area that can seem pretty costly. That's why we are so focused on delivering true value in our compliance solutions. In providing compliance software to more than 500 financial institutions, we are dedicated to ensuring that you have a wonderful experience working with us, get data-driven insights out of every analysis, and are able to continue learning and growing every day.

Build a strategic plan that evolves with your financial institution.

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