What tactics do you use to increase the likelihood of getting your budget proposal approved? Anand Bhakta breaks down how to prepare, pitch, and follow up with the CFO to make a persuasive business case for a budget request. Read on to learn seven strategies to help a CAE make an effective case to the CFO that providing resources for risk and compliance activities is critical to achieving business goals.
A key component of building a successful internal audit department is convincing the CFO to invest in managing risks. Whether it is your annual budget or overages, every CAE faces the challenge of obtaining approval from the CFO and stakeholders.
It may be a challenge to convince the CFO to agree to any increase in budget — or even to continue to fund the internal audit department at current levels. But many CAEs don’t do enough to prove the business value of their work in a budget discussion. Internal audit is an integral component of the business, and it’s the CAE’s responsibility to communicate the value of their department’s activities to achieving a company’s objectives. Whether you’re a seasoned veteran of budget discussions or you’re getting ready to present a proposal to your CFO for the first time, these seven tips and techniques will put any CAE in a strong position to convince the CFO that internal audit’s requests are both reasonable and necessary.
1. Know Your Company Culture
Every company has a certain posture. A strong grasp of your company culture can help you effectively frame your argument about how internal audit’s activities will drive organizational value. You can start by asking whether your company prioritizes cost, revenue, or people? For example, if a company’s business model is geared around low margin and high volume, the company culture is likely to be more cost conscious as well. In comparison, a company with a heavy growth revenue and higher margins might have a culture that’s more focused on promoting growth than cutting costs. An additional factor to consider is that some companies are more people-focused, putting resources toward strategies like culture committees and recognitions to keep their people happy. When planning how you’ll argue that devoting resources to internal audit can help your company achieve its objectives, it’s important to know what things matter most to the company.
2. Consider Your CFO’s Communication Style
How does your CFO like to receive information? Knowing how to navigate different communication styles will help you present your budget proposal in a way that inclines the CFO to be open to your request. Some CFOs thrive on numbers and hard data, so you’ll want to systematically outline all the facts and present the details they want upfront. Other people prefer to focus on the big picture without spending time on the details, and you’ll want to give them the high-level overview that lets them skip directly to what’s most important—though you’ll need to be prepared to field follow-up questions on the spot. If you know your audience and tailor your message to fit their communication style, you’ll be able to make your argument heard.
3. Start with Prior Wins
To win any argument, it’s a good strategy to lead with the value that you’ve already added to establish credibility. Quantifiable measures of success are best. Perhaps you conducted an operational audit that produced a dollar amount of cost savings. Or, you achieved 75% reliance from external auditors, which resulted in lower audit fees. A win doesn’t have to be related to internal audits—you could highlight that internal audit has done a specific number of activities supporting the financial statement audit, which resulted in direct dollar savings in external auditor fees. You can also bring up less quantifiable wins, such as being a part of a new software implementation to help ensure controls are embedded in the software to prevent future losses. Even if you already have credibility in the CFO’s mind, it’s always good to remind them of it with these kinds of previous successes.
4. Make the Business Case
The CFO does not necessarily live in the risk management world — they live in the world of financials. It’s the CAE’s responsibility to gather data and develop arguments to convince the CFO using the finance terminology they’re familiar with. It is crucial to show the CFO how your budget request will add value to the organization or will support the organization in meeting its objectives. For example, if you want your organization to be PCI compliant, you’ll need to clearly link the request for resources to become compliant with revenue generation — the business won’t be able to accept credit cards without a PCI certificate. Your case will be stronger if you make the connection for your CFO about how money for risk and compliance activities is critical to achieving business goals.
5. Show the Cost Comparison
It’s good practice to show the CFO that you’re not just asking for money, but that you’ve thought out the cost calculations. To extend the previous example, you could explain to the CFO that if the company needs to be PCI compliant, you’ve calculated the costs of becoming compliant in two different ways. Then, clearly lay out the cost difference between hiring a consulting firm and using a hybrid model that leverages internal audit. This further builds your case by showing that you are budget-conscious, trying to save the company money, and achieving its objectives.
6. Keep an Open Mind
Negotiation is a two-way street, and showing that you’re willing to listen to what the CFO has to say can go a long way. Demonstrating that you are open to considering their views is crucial — even if you know the answer or disagree with the CFO. It’s important to follow the previous techniques to get your point across as effectively as possible, and then let the CFO know you’ll take a look into their concerns. Showing a willingness to keep an open mind will help you cultivate a reputation for being reasonable, which will put you in a stronger position going forward.
7. Know How to Follow Up
In a budget discussion, just like in any other meeting, it’s good practice to always follow up afterward with a summary of what was agreed on. Similar to the earlier step of crafting your argument to fit the CFO’s communication style, the method of summary and follow up will depend on your CFO. If the person is very detail-oriented, they might want to roll up their sleeves and be the one to dictate how things move forward. If your CFO is more hands off, you may need to manage upwards by summarizing and sending reminders to follow up. Knowing your CFO’s communication style will help you approach the post-meeting process to your best advantage.
These tips and techniques will help you during a budget discussion, but a CAE doesn’t have to do it alone. The CAE should consistently work with other parts of the organization to develop strategies that use internal audit to drive business goals. By cultivating solid relationships with other business leaders who also have the ear of the CFO, a CAE increases the likelihood that the CFO will hear positive news about internal audit’s value-add — and will be more likely to approve future budget requests. If a CAE builds active relationships and follows these seven steps to effectively present the budget proposal, they will be well positioned to secure the resources needed to identify and mitigate risks.