Question

The chair of the budget committee at your company, Bill Strong, has come to you, the CFO, to discuss improvements to the budgeting process for the company. In years past, many of the employees have not “bought in” to the budgeting process and Bill wants to do everything possible to make sure all employees of the company work together to design and implement the very best budget possible. Bill is asking you, along with the other executives in the company, for your ideas on how to implement an effective budgeting program.

Write Bill a memo outlining at least three ideas you have to implement an effective budgeting program.

Answer 1

Hey there !

Here, in this case study we have to explain that as a chief executive officer of the company, how can you bring about key improvements in the existing budgeting process of the company.

Also it is already been told that In years past, many of the employees have not “bought in” to the budgeting process and Bill wants to do everything possible to make sure all employees of the company work together to design and implement the very best budget possible.

So the first idea in itself should be to :

1. Including the whole team in the budgeting process.

Budgeting process needs to include the whole team as finally it is the team only which has to face the process. They are the ones who will directly get impacted by the process system. So it is always a better idea to include them in the budgeting process itself so that they can also help in value addition and also help the team leaders in understanding the actual issues being faced by them and how can improvement be brought about in the existing system, since they know better.

Also, inclusion of the employees in the process will instill the feeling of Mutual cooperation and in turn boost the motivation of employees and they will associate themselves as a part of the company only.

2. Next, it is important to note that the budgets should be flexible and they should be adjustable to every possible scenario i.e the managers should ensure that the budgets they prepare can be adjusted and modified according to every changed future circumstance. Alos, the budgets should be flexible to all levels of capacity/ availability/ market conditions etc.

3. Clarity about Objectives and Targets of the Company

This is the most important factor that needs to be kept in mind during the whole budgeting process. The objectives and targets of the compnay along with the strategies/ vision and mission of the cpmpany should also be kept in mind while drafting the whole budgeting process as these are the pillars of the company which serve as strong foundation of the company.

If thse targets are kept in mind then it will help the organisation to achieve its desired growth.

I hope the above solutuion is clear to you now.

Do let me know if you have any queries.

All the best !