Leadership Skills Training: Budgeting

Preparing to Budget Reminders

  • Budgets are plans.
  • Understand your goals before budgeting.
  • Handle uncertainties with communication and research.
  • Make all forms easy to understand.
  • Ensure the accuracy of all formulas on your spreadsheets.
  • Give yourself enough time to prepare properly.

Budget Manuals Should Include:

  • An introduction to the importance of budgeting.
  • A timetable for budget completion.
  • Guidelines to common assumptions and questions.
  • Copies of budget forms with instructions for their completion.
  • An organizational chart.
  • Names and numbers of whom to call in case of problems.

Recommendations for Budget Forms:

  • Make your form efficient and easy to use.
  • Include only the necessary details.
  • Avoid amateur or extensive artwork.
  • Make your form logical, organized, and easy to understand.
  • Use spreadsheets to minimize errors.
  • Ensure accuracy of all formulas.
  • Correct all grammar and avoid slang.
  • Have someone else check your work.

Six Steps to Effective Budgeting:

  • Take time.
  • Encourage participation.
  • Be realistic.
  • Don’t get stuck in the past.
  • Be ready.
  • Be flexible.

Writing your Budget Reminders

  • Consider the accuracy of the numbers from previous budgets.
  • Send time on parts of your budget proportional to their importance.
  • Try to use data for your predictions.
  • Remember that trends are assumptions.
  • Begin with a preliminary budget.
  • Allot enough time to spend for revising the budget.

To make a preliminary budget:

  • Use the expenses paid from last year’s budget.
  • Make an educated guess about the information you still need.
  • Predict your achievable outputs.

Benefits of preliminary budgets include:

  • Early warnings of plans that do not fit.
  • Highlighting a mismatch between inputs and outputs.
  • Indicating missing information.
  • Aiding communication with sources of information.
  • Early solutions of misunderstandings or problems.

Budget Steps:

  • Check last year’s numbers.
  • Check to see if there are trends of over or underestimating.
  • Create a preliminary budget.
  • Put your budget form on a computer spreadsheet.
  • Don’t try to fake precision.
  • Consider what will happen if your budget is off by 10%.
  • Consider best and worst-case scenarios.
  • Check your figures carefully.
  • Have someone else double-check your figures.

Monitoring your Budget Reminders

  • Always investigate to determine why variances occur.
  • Use alternatives or reduce discretionary costs to remedy variances.
  • Make sure budget errors do not reoccur.
  • Concentrate on variances that are controllable and material.
  • Involve your team in the budget process.
  • Involvement leads to greater responsibility and motivation.
  • Take time to learn from the budgeting experience

A typical control cycle:

Set the Budget

Take Control Action Record Actual Results

Compare

In the end, ask yourself the following questions:

  • How much time did I you [sbp1]spend preparing to budget?
  • Should I have spent more time preparing?
  • Did I clarify my goals?
  • Did I clarify my strategy?
  • How well did I write the budget?
  • Did I make many errors?
  • Were many variances unexpected?
  • Did I see any patterns in my mistakes?
  • Did I forget any expenses?
  • Were certain expenses more difficult to predict?
  • How well did I monitor the budget?
  • Was I able to take control of the variances?
  • Did I involve my team?

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[sbp1]1Use “I” instead of “you” in these bullets.