Sunday, April 29, 2012

The Three-Eyed Hurricane

As I reported last Sunday, I was expecting a stormy week ahead at the office.  That week is now behind me, and I'm happy to report that those five days went shockingly well, blowing away even my most optimistic expectations.  On the latest night of the week in the office, I was out of there by 5:15PM--not bad at all considering that this time last weekend, I was mentally preparing myself for an office camp-out.

By late Tuesday afternoon, we had essentially finished building our budget.  But that's not the tough or scary part.  Once we've finalized what the actual total dollar amount, we start preparing the explanation to that annoying, looming question: "What changed between this year's expense and next year's budgeted expense?"  This entails filling out the dreaded analysis of change template, or "AOC," the three-letter acronym and resident four letter word of the Spring Plan process.

We fill out all of the things that we know changed--total production volume is up or down, our mix of more expensive versus less expensive products changed our budget by $x amount, and these three hundred other known changes also caused our expense to go up or down.  The leftover amount--the gap between what we can explain and what our actual budget amount is...that's the part that can really create problems.

There are horror stories where the unexplained amount reaches into the tens of millions of dollars.  Unfortunately, there's no "uh...we're not sure..." section in the AOC template, so closing the gap requires some brilliant fiction and storytelling to come up with possible explanations on why things changed form one year to the next.  It it makes presenting and defending the budget very challenging and unnerving, knowing that if there are questions about the stuff you made up, you need to make up even more stuff to defend it...

That part of the process had me the most scared--if that gap was big, it was going to be a very, very long week.  When we got everything put together, the gap was $15,000.  That's tiny...microscopic...on a budget of hundreds of millions of dollars, fifteen thousand is less than an fraction of a percent!  It doesn't even show up in the rounding.  I could easily walk in and say "I have no idea what this $15,000 is," and I'd get laughed out of the room for even talking about such an immaterial number.

I could not believe my good fortune.  This was the stuff of finance legend--if there were a Finance Hall of Fame, I'd be a first ballot inductee.  I wanted to high-five my calculator and frame my spreadsheet when the budget came back with almost $0 unexplained dollars.  That never happens...never!  The freakish rarity of the situation made me worry that I'd missed something in the process, but there was no time to get too concerned--we had to shift our focus toward presenting the budget, first on Wednesday and again on Friday.

The presentation portion of the week went equally well.  The overall budget was generally good news, which always makes things easier, and having logical explanations for all of the changes in the AOC template further simplified the process.  No fiction this time around; no feeling like the whole thing was a giant house of cards that could come crashing down at any moment during the presentation.  It didn't hurt that me and the other two guys in my group coordinated the night before Friday's presentation and all wore green shirts, which drew a few laughs and one "Three Stooges" remark.  By Friday afternoon, I was thrilled--no late nights, no missed workouts, and expectations wildly exceeded.

But it's not over just yet.  I'm sitting in the eye of the hurricane this weekend, and it's back into the storm tomorrow morning.  Our portion of the budget is behind us, but we receive two other important inputs from other groups tomorrow afternoon, then frantically consolidate everything and start preparing the presentation of the overall picture on Thursday morning.  The verdict's still out on whether it'll be good news or bad news.  Once again, a staggering amount of things need to get accomplished this week.

Next weekend will be the second eye of this hurricane before we present the budget one final time the following Monday morning to a different, and perhaps our most critical, audience.  At that point, the third, longest, and most peaceful eye of this storm arrives, lasting for a few weeks before the final two-day whirlwind when we do the whole thing over again in two days in early June.

This past week went unbelievably well, but I can't allow myself to set my hopes too high for the coming week.  Things have a crazy way of averaging out over time, so last week's smooth sailing could easily mean violent waters ahead.  I've only weathered the first eye of this ferocious triclops storm, but I can't deny that my outlook for the future is decidedly more positive than it was last Sundae.

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