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Death, Taxes, and Budgets: 4 Tips Credit Unions Need to Know About Budgeting for Data Analytics

Posted by Mark Portz on Sep 6, 2016 12:20:00 PM

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Budget Planning: Tips for Credit Unions Budgeting for Data Analytics

A professor at the University of Minnesota once taught me that death and taxes are not the only certainties in life, because you can also always count on your budget being wrong. While this (annoyingly) still seems to prove true, there are a number of practices to improve budget planning and optimize the potential of your budget to prepare you for data analytics.  

With fall around the corner, many credit unions are entering the budget planning stages for the next year. If you are planning to remain competitive in the industry,  this does not mean you are simply tweaking minor adjustments from last year’s budget. Credit unions are complex businesses, serving a variety of members in a relatively difficult-to-predict industry.  At the same time, the financial services industry is starting to experience incredible innovations and disruptors, which have the potential to permanently alter the financial services industry. It’s time to make sure your budget is up-to-date so it won’t put you at a competitive disadvantage.

  1. Start With Your Goals

Starting with your goals is certainly not unique to credit unions, but it is still a very important first step before putting numbers into your budget. Have a discussion about both your short and long term goals and have a plan to get there. It will be easier to manage your budget if you know what you are working toward and which projects or departments will require higher levels of funding to achieve the new goals. Remember to follow SMART guidelines (Specific, Measureable, Attainable, Relevant, and Timely) to increase the effectiveness of your goals.

Perhaps you are experiencing difficulties tracking and analyzing member data because it is coming from a number of different sources (i.e. branches, online, mobile, social media, etc.). A SMART goal might be to integrate your member data so you can go to one place to get a full snapshot of each member and his/her interactions by November 1 without spending more than X dollars. You can now determine the best approach to achieving this goal.

  1. Plan Ahead for Large Purchases and Changes

Now that you have your goals set, consider what it will take to achieve them. Look ahead at which purchases and investments you may need to make, and don’t ignore such expenses for your budget. As I previously mentioned, the financial services industry is changing. FinTech startups are evolving the way financial institutions interact with members and customers. Consider how you will continue to compete and better serve your members as the industry continues to evolve. When budgeting for data analytics, there are several routes to consider, each varying with pros and cons.  In order to briefly cover expected expenses alone, let’s look at these options:

  • Historically common solutions include core vendor solutions and custom built data warehouses, either in-house or with the use of a consultant. Costs to consider while preparing for these solutions include multiple build phases, which typically take several years. Throughout this process, you will be paying not only for the hardware, software, and revisions, but also the salaries for data scientists, data architects, report developers, and likely bring in consultants.
  • A collaborative CUSO Data Platform is another option, which has aims to leverage the collaborative spirit of the industry by developing industry standard, “data integration middleware” or a platform data model that is “connected” with others that have the CUSO solution. As for budgeting, this method requires software licensing fees, and other associated costs such as installation, but reduces the need for additional staffing, and serves a number of other advantages.

It is also important to remember that any investment in data warehousing is not simply one large purchase. While there are upfront costs for hardware, software, etc., you must also consider the recurring costs for each option. 

  1. Remember You’re Not Alone

All credit unions need to set a budget and many are having similar experiences and have the same questions. Credit unions are part of a very collaborative industry and it is possible for one credit union to learn from the experiences and data of other credit unions. It is even possible to discuss your budget with credit union professionals and industry experts during a personalized budget planning consultation. Regardless of what you are budgeting for, it is wise to discuss your budget with an outside party to receive another perspective rather than going at it on your own.

  1. Review it Often

Once you have set your budget, don’t just check it off your list and ignore it for the rest of the year. Track your expenses and ensure you are putting yourself in a strong financial position while simultaneously maximizing the analytic capabilities of the credit union. Hopefully, you will be able to remain within the original boundaries of your budget, but it is important to remain flexible and adapt your budget as unexpected and necessary expenses or opportunities may occur, rather than just throwing it out the window. 

If you’d like to learn more about budgeting for data analytics, or even discuss your unique budget with a professional, request a consultation today and make sure you are on the right track.

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Topics: Budgeting, Data Analytics