Budget time: What again, already?
August 1st, 2009
No comments
"However beautiful the strategy, you should occasionally look at the results"...WC
Print
It’s the time of the year again when many organisations are preparing plans and budget assumptions for year 2010. It may be good to time to dust off the steps we looked at in earlier articles budget assumptions, allocation and management of the budget.
Reports shows that, of the top 100 stock listed companies, the average time used for planning and budget preparation is not long at all. But this is in stark contrast to the time taken on analysis of budgets and revisions. This latter phase iterates over a much longer time as and discussion takes place as to how and if it is well coordinated to accommodate the companies’s strategy.
After top down business PLANS and budget ASSUMPTIONS are set, generally there are three budgeting phases. The first is a bottom up estimate of MANPOWER REVENUE and OPEX and CAPEX. This is then followed by ALLOCATIONS, and an operational PRIORITIZATION phase and finally the Capital FUNDING phase for approval review.
There are also many schools of thought that the budget step should be eliminated as it seems to waste so much time. This may good if rolling forecasts are well defined to place the annul budget but generally this only replaces the first phase. Many also subscribe the the thought that to much short term focus limits the organisation ability to focus and can cause it to falter. Doing budgets in the traditional way tends to allows greater focus also on the 3 year plan and draws a distinct line in the sand in on commitments by operations.
But either way, make no mistake, the budget is a vital process to get alignment for the organisation The better this is done the better the result. The final document is underpins the agreements reached for performance for the ensuing year and it a solid reference point to measure against and provides for consideration by external stakeholders . People such as shareholders, business partners, creditors and banks and financing institutions enjoy a much greater degree of confidence when budgets are well thought through and are likely to remain or increase any involvement.
it is for all sorts of justifiable things that come up out of the blue. When the semester begins, when school excursions get scheduled, for extra pocket money and so on it goes. Yet somehow you manage to get through it.
Recent Comments