Question

Give reasons why you need a budget. Have you ever been involved in the budget process at your organization/or at home? If so, describe your role and responsibilities. What aspects of the budget process might you change where you work or at home, if you had the opportunity ?

Answer 1

A Budget is basically made to make a plan to spend the money. Following are the reasons why a budget is needed:

1. Budget helps in determining income and expenditure of the business and thereby leads to detemination of profit/loss incurred. This helps in determing if the business is viable for foreseeable future.
2. Budgets help in determnig the amount of money needed to spent and if we have that amount. It also helps in prioritising and focusing on the goals that are important in case we donot have the money.
3. Budget helps us to decide if the money needs to be raised in order to meet the expenditure.
4. It helps to determine if one can run into debt or alternatively if one currently has a debt, it can help in coming up with a plan to pay it off.
5. Budgets are a tool for decision making. Based on the budgets prepared, important decisions regarding the business will be taken.
6. Budgets are also a tool for tracking performance of the business. Actual income and expenditure can be compared with the budget to determine if the business is focused on the goals decided while making budgets and whether any corrective steps need to be taken to achieve the goals

Roles and Responsibilities:

• Preparing Budget for the various departments and the company as a whole in alignment with future goals, mission and the vision of the company.
• Ensuring budget deadlines by making sure all the budgets are submitted by the departments within the prescribed time limits.
• Presenting the Budget to Management and taking the necessary approvals.
• Designing effective budgeting polices and procedures to enure budgeting process goes smoothly.
• Meeting budgeting compliances with legal regulations.
• Monitoring revenue generated, comparing it with the budget and making recommendations necessary to meet the budget.
• Ensuring the spend of the company does not exceed the budgeted expenditure and making necessary suggestions to control the spend to increase profitability.
• Undertaking periodical reviews of the budget and revise the same as necessary.

Process Improvements recommended

1. Clear Goals go a long way in preparation of good budget.
2. Involve the entire team. You never know whom might come up with a good idea.
3. Plan ahead and set up meetings beforehand.
4. Stick as much as possible to the plan for the budget process.
5. However, don't be rigid. Allow flexibility to make up for any new informtion that may come to light during th budget discussions.
6. Keep a track of all versions of budgets created. Save versions of budgets created for various scenarios. You never know when you might have to back track for some issue.
7. Make a clean powerpoint presentation to Management in simple yet business terms. Remember not everybody understands jargon. Be prepared for any questions that might be thrown at you.
8. Once budgets are approve, notify the individual departments and attend to any questions or queries related to their respective budgets.
9. While comparing budgets with actuals and making recommendations for improvements in revenue and spending, remember not to take over the process. The individual department knows what actually happens. Talk to them, listen to them and accordingly suggest improvements.
10. try to be objective while preparing budget and not get biased. Company goals are very important and cannot be sidelined while making budgets.