The current economic customer makes it difficult for training departments to obtain additional funds, let alone normal operating funds. Departments often have to “make do” with the budget they have been given. But once you have a budget, no matter how big or small, you need to have an idea of which costs are fixed and which are variable.
Fixed training costs are simply those you can count on at any time. You will budget for these costs and be confident that they will most likely stay the same. For example, salaries for training staff are relatively fixed. When you’re working on your budget, for any time period, you know if you’ll be able to add staff, which we’ll discuss in a moment. You’ll also know how much to budget for raises based on last year’s average. But as a whole, you can count on the salary as a fixed item.
The equipment you regularly use for training also has a fixed cost. In fact, much of the equipment used by training departments is purchased and paid for all at once. These items are everyday items such as photocopiers, computers, laptops, overhead projectors, LCDs, screens, automatic whiteboards, and any other equipment used routinely in the classroom or administrative office. But do not forget that you will have to fix the cost of maintaining these items. Light bulbs for ceilings and LCD screens are quite expensive and must be replaced with a manufacturer-approved item. One way to correct for these costs is to know how long these items last and plan your replacements accordingly. One of the biggest surprises for a training budget is when all the LCD screens burn out at the same time, creating an expense that can add up to thousands of dollars.
General expenses are also a fixed expense. As a training manager, you know how much it costs to maintain your location(s). These costs include rent or mortgage payments, expenses that go with locations such as office supplies and paper, as well as any income that comes from other departments or businesses that rent space in an owned building. You can also include utility costs as fixed overhead, but be careful when the weather is extremely hot or extremely cold: one way to do this is to make sure the engineering department installs timed thermostats. Many organizations waste overhead money heating and cooling spaces that are empty overnight or on the weekend, so the training department can continue to prove itself by turning off utilities when not in use.
Finally, fixed or planned programs are also fixed costs. For example, if you know how many people will be in leadership development during the budget period, you can plan for materials and outsourcing costs right away. The best thing to do with planned programs is to stick with them unless changes are absolutely necessary.
On the other side of the budget, variable costs are the ones you’ll need to plan the most carefully. Do you pay bandwidth usage fees or online courses based on the number of users? If so, this is a variable cost. You can view the average usage from the previous year, or you can simply purchase an advanced number of users for online courses to manage this cost. But don’t end up in the position of rejecting people.
Your material costs can also be variable. Think about what programs aren’t “fixed,” such as new employee training. You know what your organization’s billing is, but can you anticipate big jumps in billing? You also know the vision and business plan of the organization, so use them to plan the cost of materials. One of the best ways to deal with this cost is to buy materials as needed and plan as you go. There is nothing worse than ending up with boxes of an outdated manual.
Finally, large variable costs can include mergers, acquisitions, expansions, and downsizing. You should have an idea of where the organization is headed in terms of mergers or acquisitions, and plan your budget accordingly. But there could be unexpected changes, like downsizing or expansions, that require spending money to reconfigure the space or add staff.
Managing variable line items largely depends on the type of budgeting system your organization uses. If the budgets are fixed, there is not much margin. But if your budgets are “rolling” budgets or “pro-forma” style budgets, you can manage money a little easier as variable costs swing back and forth. For fixed budgets, the best way to handle variable expenses is to find ways to pay for them with fixed costs. When variables get in your way, find out how the organization’s budget is handled and ask financial managers for help.
Now that you know which training costs are fixed and which are variable, you’ll be better prepared to manage money as problems arise.