This memo aims at providing basic information about how budgeting processes are developed and what steps should be recognized by managers in their work. Many employees admit that they know enough about budgeting and its peculiarities in certain fields. However, this information should help my co-workers understand the essence of the budgeting process and explain how managers may use this information to manage their work and make their decisions in a proper way.
A budgeting process is a procedure during which an organization makes significant decisions on how to build its budget and implement all necessary steps. It is not enough to introduce a paper with a list of steps to be taken. It is necessary to think of all organizational and working aspects to clarify if a company and its workers clearly identify the goals and have enough sources to meet them. A budget is usually used to set the expectations for revenues and possible expenses that may be observed in the future and influence the quality of the work (“Budgeting procedure,” 2017). To introduce a successful budgeting process, Kilmer (2017) suggesting focusing on the following aspects:
- The involvement of relevant players who are aware of what is expected to be done and what can be actually done in the company;
- The creation of a realistic project in terms of which budget expenses do not lead to negative outcomes only;
- The understanding of budgeting sources and relationships that may be used and developed in the organization;
- The identification of all stakeholders, potential investors, and other tools that may improve a budgeting process.
Many companies find it helpful to create special checklists and follow them during the creation and implementation of a budgeting process. Leaders admit that these checklists help to avoid difficulties and unpredictable complications based on obligatory training and monitoring (Lidia, 2014). However, these lists may be useless in case people do not understand the goals of a budgeting process.
At this moment, the three main purposes may be identified in the field of business. Rubin (2016) introduces accountability (i.e., the presence of the money that can be spent and the identification of the authority who is responsible for money spending), decision-making (i.e., the evaluation of up-to-date information for all organizational workers), and openness (i.e., the awareness of the financial conditions that have to be improved or changed with time). However, some organizations are ready to define new goals to make sure that their budgets are appropriate and effective.
Finally, to give a better understating of what a budgeting process is, I would like to focus on several examples and explanations on how managers should use this information and make their decisions. Today, many people are eager to try something new and choose innovations to achieve success and recognition. For example, some companies refuse the idea of ordinary annual budgeting and use a radically decentralized model, “Beyond Budgeting” (Sandalgaard & Bukh, 2014). Such a model helps to make fast decisions and consider the changes with the help of which improvements are possible.
However, radical models are not always appropriate in companies. Therefore, general suggestions and examples are used to understand what kind of work should be done by budget managers. Peavler (2017) compares operating and financial budgets to explain what plan is the best option. Managers investigate prices, evaluate the abilities of the company to pay for its progress, and think about the time that is required to cover all organizational needs.
Such work is a unique opportunity to comprehend how to improve and stabilize a financial situation of a company and involve as many people as possible in the solution of organizational problems.
References
Budgeting procedure. (2017). Web.
Kilmer, D. (2017). 9 considerations for creating a budgeting process. Web.
Lidia, T.G. (2014). Difficulties of the budgeting process and factors leading to the decision to implement this management tool. Procedia Economics and Finance, 15(2014), 466-473.
Peavler, R. (2017). Example of a financial budget for a small business: What you should include in the financial budget. The Balance. Web.
Rubin, I.S. (2016). The politics of public budgeting: Getting and spending, borrowing and balancing (8th ed.). Los Angeles, CA: CQ Press.
Sandalgaard, N., & Bukh, P. N. (2014). Beyond budgeting and change: A case study. Journal of Accounting & Organizational Change, 10(3), 409-423.