As CFO, within your overall business budget you’ve got multiple smaller budgets that have to be managed. Of these, there’s one that tends to be one of the more difficult to handle: compensation.

There are several reasons that budgeting for compensation can be more time-consuming and stressful than budgeting for, say, capital expenditures.

For one thing, compensation numbers have a direct and immediate impact on your employees, so making cuts can be highly uncomfortable. In addition, your employees are your most vital asset, so you want to ensure that you’re rewarding them fairly for the great work they do.

For another, compensation planning is an inherently complex process. Employee benefits, cost-of-living raises, performance-based raises – these and other factors must be taken into account when working with employee compensation, and balanced against what you can afford to budget.

How can you make budgeting for employee compensation go as smoothly as possible? Here are a few tips.

Maintain strong budgetary controls.

When you’ve got a large company, there are multiple people who can – and should – be involved in payroll decisions.

Your department heads, managers, and fellow executives may all be responsible for recommending members of their teams for raises, bonuses, or other changes in compensation. While their input is invaluable, that doesn’t mean that each of them should have the ability to alter the compensation budget.

To prevent misunderstandings and mistakes, which can be especially disastrous when they impact your employees’ compensation, it’s important that you maintain strong budgetary security and controls.

Doing so requires, first of all, clear communication. Your management team should know who has the power to make final decisions regarding payroll and compensation, as well as the process for getting approval from those people. These protocols should be documented and made easily accessible to your managers.

The second part of maintaining strong budgetary controls is to use an effective budgeting solution. Good budgeting software will, at its most basic level, allow you to manage who has access to what.

Great budgeting software will go further. True Sky, for example, not only allows you to manage user access to the budget but also lets you review audit trails to identify errant entries. Users can also include attachments and comments with their entries, giving reviewers the context to understand what’s behind the numbers.

Allow enough flexibility to ensure that you hold on to your most valuable employees and can manage staffing changes.

A good budget is one that allows for change, whether that’s deciding to release a new product earlier than expected, expanding or contracting your sales team, or adjusting to a sudden market change.

That includes times when a key employee goes way above and beyond, or when one of your best people lets you know that another company is making him an aggressive offer. To maintain success, you have to be able to hold on to your most valuable employees – and not just hold on to them, but keep them happy, too.

Sometimes that will mean expenditures that you didn’t plan for, like a bonus, or a raise that goes into effect earlier than was originally planned.

A budgeting solution can help you here, too. True Sky allows users to test out What If scenarios and easily update budgets and forecasts to reflect new situations. Data is available in real time, so you always know where you stand.

Another scenario to consider is whether there might be a potential need for any temporary or part-time employees throughout the upcoming year. Perhaps you’ve got a large project, like an ERP implementation, planned for the fall. Maybe one of your department heads is switching to a new database, and will need data entry performed.

Whatever the case, it’s vital that you be able to bring on additional people should you need them, and to do that, you have to have the compensation funds available.

Learn more about how True Sky can help you with compensation planning here.