One of the top challenges a new manager will face is handling and understanding the laboratory’s finances and budget planning. Every laboratory has a budget, and for the laboratory to be successful in meeting its goals, proper budgeting must be a high priority.
How a manager interacts with the budget will vary depending on the type of laboratory, their level of management, and the organization. Most new managers will oversee the daily lab operations and the budget that supports them. New managers with limited experience should learn the key concepts, terms, tools, and best practices to manage their budget responsibilities effectively.
Why budgeting matters in the lab
A budget is a yearly plan outlining how the money will be spent to maintain laboratory operations. The laboratory budget determines what can happen in the lab on so many different levels. Proper money management is key to a productive work environment. Everything has a cost involved, so a budget is a proactive approach to making sure that money is available when needed. Employing a budget enables a lab manager to make informed decisions and provide the necessary equipment, staff, and resources for the lab to achieve its goals.
The onset of the fiscal year may seem uncomplicated—the manager has a new budget to allocate, and resources appear abundant. The key is to make sure that funds are still available 10 months into the fiscal year. Poor money management can have a significant negative impact on laboratory operations.
Running low on funds, running out of funds, or even overspending can cause delays in analyses, create waste, and even halt work. In addition to impacting lab work, poor budgeting can impact a laboratory’s reputation, which in turn can affect larger items such as equipment purchases, maintenance, and potentially hiring.
In years when money is tight, maintaining a budget is even more important and shows your resilience as a leader. I have worked through many lean years, but having a budget and sticking to it made the difference. It was not always smooth, but it provided direction for purchasing decisions and prioritizing analyses.
Budgeting terminology
The language of budgeting includes many different terms and jargon. The following are some important basic terms that new lab managers need to understand:
- Fiscal year: A 12-month period used for financial accounting and budgeting; does not have to follow the calendar year
- Cost centers: How expenses are categorized within an organization
- Budget variance: Difference between the planned and actual budget/expenses
- Budget revision: Making updates to the budget during the fiscal year
- Fixed vs. variable expenses: Expenses that remain constant versus those that fluctuate during the fiscal year
Common lab budget categories
Laboratory budgets will cover various areas within the lab. The manager needs to understand the most common categories used in budgets, how these align with operational goals, and things to consider when budgeting. Here are some examples:
- Consumables and supplies: These high-use items are reordered most often and can quickly drive up costs. Tracking order quantities and timing provides valuable insight into usage patterns and helps labs forecast needs more accurately.
- Service contracts: Request quotes several months before the fiscal year closes to decide on renewals and avoid service interruptions in the next cycle.
- Instrumentation: Build strong relationships with vendors when evaluating new purchases. Bundling multiple instruments can often secure better pricing and discounts.
- Staffing/personnel: This can take up a large portion of the budget, but if the manager understands the laboratory’s goals and historical production levels, they can properly evaluate the need for additional staff.
- Training and certifications: Meet with staff at least quarterly to identify needed or desired professional development. Also take some time to explore low-cost and flexible educational options that staff can complete at their own pace.
- Facilities/utilities: Maintain detailed records of usage to generate reliable data for forecasting future costs.
Tools to track and manage budgets
Each organization should have its own way of tracking and managing budgets. As a new lab manager, you will likely continue with the system that’s already in place. If you are given options, you need to choose an intuitive system that helps keep track of expenses and various budget categories.
The simplest to use is a spreadsheet template. I have used this for my overall monthly laboratory budget, but I also have used it to keep track of specific categories and lab supply orders that we use very frequently.
Lab Management Certificate
The Lab Management certificate is more than training—it’s a professional advantage.
Gain critical skills and IACET-approved CEUs that make a measurable difference.
Another option is monthly reports from senior management or the finance department. These reports are great tools since they take some of the burden of recording expenses off the manager, and they show the manager what the organization has recorded as expenses.
Managers can also use budget modules that are part of their laboratory information management system (LIMS) or for larger organizations, enterprise resource planning (ERP) software. Regardless of the tool or system used, the manager must invest time and energy in making it useful and effective.
Best practices for lab budget management
For budgeting to be effective, the laboratory manager needs reliable and up-to-date financial information. A lab manager will need to be proactive in their approach toward the budget. While each lab’s budgeting system is tailored to their specific requirements, there are some general practices everyone can employ:
- Regularly review the budget to monitor how the lab is doing
- Establish good communications with finance and/or senior management
- For new projects or large purchases, start planning early to help avoid any issues
- If possible, add a small buffer to each category to provide flexibility during the year.
- Get the staff involved, have them look for ways to save money or assist in monitoring purchases
- Work with vendors to negotiate better terms on purchases and service contracts
One of the most challenging issues in budgeting is managing large, unforeseen costs that can disrupt operations. While they can’t be fully planned for, managers can lessen their impact by building a buffer into the annual budget, adjusting or reducing other categories as needed, and negotiating to spread payments over time. The final issue to note is one preventable and something all labs need to avoid—overspending.
Overspending can occur when labs fail to seek the best prices or discounts, purchase items that are no longer needed, or unnecessarily spend money. Having a realistic budget in place, strong record-keeping, and managers working to maintain the budget can help prevent this. Consistent communication with lab staff is essential to help the lab manager ensure proper ordering is taking place.
A new lab manager can be overwhelmed with the many responsibilities they have after being promoted. The lab budget is one of the most critical ones, and if the new lab manager realizes this early and puts the time into it, it should make life easier for them.
For a laboratory to be successful and meet its yearly goals, it needs to have a proper budget, and the manager needs to work hard to stay within it. Working within the budget will ensure the lab has sufficient funds throughout the fiscal year and will assist the manager in better planning for lab operations and future endeavors. Budgeting should be viewed as a tool to help the laboratory meet its goals, rather than a chore to be checked off.
