In: Accounting
If you were the owner of an Accounting Firm, how you would use budgets in your company and how you would use budgets to hold each manager accountable?
If I'm the owner of an Accounting Firm, I would use budgets in my company theses ways
Budgets Works
When most people think of budgets, the household budget comes to mind. Although the budgeting process for companies can become complex, a budget usually compares a company's revenue or profit versus its costs or expenses in a given period.
Of course, determining and forecasting how much to spend on various expenses and projecting sales is only part of the process. Company executives also have to contend with a myriad of other factors, including projecting capital expenditures, which are large purchases of fixed assets such as machinery or a new factory.
Companies must also plan for their ongoing cash needs, revenue shortfalls, and the economic backdrop. Regardless of the type of business, the ability to gauge performance using budgets is critical to a company's overall financial health.
A budget is a forecast of revenue and expenses over a specified period. Budgets are an integral part of running a business efficiently.
A static budget is a budget with numbers based on planned outputs and inputs for each of the firm's divisions.
A cash-flow budget helps managers determine the amount of cash being generated by a company during a period.
Flexible budgets contain the actual results and are compared to the company's static budget to identify any variances.
Types of Budgets
Master Budget
Static Budget
Operating Budget
Cash-Flow Budget
Use budgets to hold each manager accountable
At the beginning of every fiscal year, corporate leaders keep a close eye on their annual and quarterly goals, projecting expenditures and revenue into the future and setting benchmark cash flow forecasts. And once a strong budgeting strategy has been established, leaders need to ensure that every employee is on board. This buy-in--exemplified by high levels of organizational accountability--is necessary to ensure the successful execution of any budgeting strategy.
Maintaining high levels of workplace accountability can not only keep an annual or quarterly budget on the course but can also guarantee the high performance of an organization. Read on to learn why accountability is the keystone of successful budgetary compliance -- and how you can bolster accountability to boost results and ensure the financial success of your company.
According to the New York Times bestseller The Oz Principle, accountability is the "personal choice to rise above one's circumstances and demonstrate the ownership necessary for achieving desired results."
If your team is consistently missing the mark on benchmark targets, failing to deliver at the speed and quality necessary to achieve desired results, or falling into a pattern of finger-pointing and creating excuses when things go wrong, you have a workplace accountability problem.
Teams that consistently demonstrate high levels of personal and organizational accountability reliably deliver results with quality, speed, and cost-efficiency. Not only do they always know who is accountable for delivering on what, but they have anticipated potential areas of cost overrun early. As a result, these teams naturally remain within 3-5% of the budget that many experts recommend.