Question

Have you had any experience in developing or monitoring a budget, either for your employer or for family? If so, please discuss your experience, both positive and negative. If you haven’t done any budgeting, what are your thoughts now about it’s importance or lack thereof. Please write about not doing a budget. Should be around 200-250 words.

Answer 1

Please see below answer to the question and you will get the idea of it as follows:

Preparation of Budget.

Positive Experience.

Negative Experience.

Although the words limit was 250 but it is not possible to elaborate it in less word and i have tried to make it as simple as i can to make it more understandable.

Answer: Yes, the budget was prepared for global level submission. So before starting positive and negative points, let us first know what is the process for preparing the budget.

Process for preparing Budget:

Finance department needs to collect required Input from different departments in the company. The department mainly includes below:

• Human Resource: This department will let Finance department about future hiring going to be happened in the company. What would be the cost to company for those hiring etc?
• Facility/Admin Department: This department will let Finance department know about future expenses company would be doing due to new hiring (like increased expense on cabs provided to employees, staff welfare activities etc.), due to expansion plan of company (like increase in Rent, operation and maintenance cost etc.).
• IT department: This department inform the cost on computers and related accessories (like headphone cost, mouse etc.) in upcoming period.

I have mentioned above three department which is normally available in the companies however depending upon size of the company. there could be other departments too like Legal department which will let Finance department know about future legal cost company can expect.

Now coming on Positive and Negative experiences while preparing the budget:

Positive Experiences:

Mostly Department found to be co-operative and we are able to get the required data on time. Which results in preparing the budget on time.

We are able to compare the results between actual and budgeted figures which results to check for variances. We can see the difference in figures what we budgeted and what company have actually done the year.

We can track the expenses and if it is really getting higher then we can report to higher management to look into and control the expenses. An example of this could be staff welfare activities - like if the expenses have already crossed the budgeted figure and we are still left with quarter pending to close the period then company will look into how to reduce the expenses or may ignore to spend any amount in the pending quarter.

As already mentioned in earlier points, we can see the difference between actual and budget only if we have prepared the budget. According company was able to plan for next year budget based on the current experience.

Negative Experience:

Although i found mostly department co-operative but once one department was not able to provide the data on time and which results in unnecessary delay in preparing the budget. This sometime creates lots of issue because global budget depends on the inputs from all the companies and department and even delay from one department or group company may results in delay of budget for the group itself.

Another bad experience was that as the budget was based on assumptions only and it may varies a lot even a single assumption goes wrong. So sometime it may not provide the actual comparison between actual and budgeted.

Again sometime companies become so rigid on the budgeted figures that it don't goes beyond it even if the situation requires this. For examples companies ignore the best talent if it goes beyond the budget.

Thank You.