Creating an effective budget can be a daunting task. It is more than crunching a bunch of numbers and throwing it out to the team. Participation in the budgeting process is an important part of the employee-management communication process. It leads to group acceptance of the budgeted goals. Budgets must be perceived to be fair and reasonable by employees whose performance will be compared to these goals. The process of creating the budget with the team is an opportunity to hear the team’s opinions and ideas and to share the organization’s vision with them. Involve them and get their buy-in, and it will lead to greater success.
In addition, technology can be crucial when creating and managing a budget. With today’s availability of cloud computing and instant communication, it is even easier to develop and manage the company’s budget. Using a system that enables the use of dimensions and containers to slice and dice the data allows budget development by division, department, or even by employee. Once established, all expenses can automatically be associated with the appropriate area, giving access to real-time actual data to compare to the budgets. Quicker analysis allows a more effective use of the budget. Issues can be identified earlier allowing for quicker resolution.
Here are a few ways a more effective budget can be created.
- 1. Identify the decision makers in the organization and involve them in the budget creation process.
- 2. Use technology to coordinate and consolidate the budgeting efforts with the team.
- 3. Create a budget that reflects the organization’s strategic plan for the company.
- 4. Engage the team in reviewing and comparing the budget to actuals in order to highlight strengths and
- 5. Identify issues quickly and create a plan for immediate resolution.
- 6. When going through the budget process remember that the budget is a tool. It is the tool that translates
the organization’s goals and strategies into dollars. It is a plan and when developed well it can provide
opportunities to work closer with the team to keep the organization on track.
If you have any questions, please contact Porte Brown to obtain more information regarding the consulting services that it provides.