Question

Budgeting

Describe your company's annual budget process.

• What is your involvement in the process?
• What works well? What doesn't work?
• If you were CEO/CFO, what changes would you make and why?
• How would you communicate to employees the value that the process brings to the business?

Answer 1

BUDGETING

Budget is an operational plan, for definite period usually a year. Expressed in financial term and based on expected Income and expenditure.

# Budget supplies the mechanism for translating fiscal objectives into projected monthly spending pattern.

# It enhance fiscal planning and decision making.

# It clearly recognizes controllable cost area.

# It offer a useful format for communicating fiscal objectives.

• Annual Budgeting Process

Here is a simple step by step process to increase the importance of budget and increasing in business.

1. Budgeting preliminary meeting: start your budget process with a preliminary meeting that bring your main managers together. Discuss strategy and priorities , realistic amount and planning process. Distribute a simple template and ask each manager to prepare a proposed budget for his / her area. Ask the manager to create a proposal that includes monthly numbers, and the descriptions of the programs and activities involved.
2. Budget Development: Allow a period for managers to develop a budget, working with the standard template. Enforce deadline for preliminary proposal and divisions. consolidate the proposed budgets into a simple budget table that list of all the proposed budgets and activities. In most cases the total of all proposals will be two or three times the real amount your company can spend.share that consolidated table with all managers. share with them the difference between proposed budgets and annual spending limits, and ask them to think about it.
3. Budget Discussion: Bring your managers back together to discuss the budget table. ideally, setup a conference room with a projector and the consolidated proposed budget. then you can go through the budget, item by item, and pair it down to a realistic amount.your managers will be together in a group, so they will have to defend different proposals, and as they do they will build up their personal commitments and their ownership of budget items and programs. they will explain one program is more valuable than another, they will argue about relative value,and they will increase the level of peer group commitment.

When this process work well, you have a more accurate, more realistic, and more useful budget.