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Budgeting

Budgets must be aligned with a business's strategic objectives to effectively translate plans into action. This guide covers the essential steps for creating both long-term (five years) and short-term (one year) budgets, transforming strategic visions into actionable financial blueprints. It highlights key budget targets and addresses budgeting challenges, emphasizing the interconnection between various budgets and business activities, especially in manufacturing. Explore the roles of budgeting committees, budget officers, and the distinctions between incremental and zero-based budgeting methodologies.

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Budgeting

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  1. Budgeting

  2. Budgets must be made compatible with a business’s strategic objectives. Steps to create a budget comprise…

  3. Long-Term (5 yr.s?) Short-Term (1 yr.?)

  4. Budgets convert strategic plans into short-term, actionable blueprints, and are usually expressed in financial terms. Budget targets would include things like….

  5. Issues in Budgeting

  6. Inter-relationship between different budgets and business activities (in a manufacturing business)

  7. Sometimes, things other than sales (e.g. production capacity) can be the limiting factor.

  8. It is also possible to have subsidiary, “vertical” budgets

  9. How budgets help managers

  10. Formally establishing a budget

  11. Often a Budget Committee is established to set the budgets, and a Budget Officer (often an accountant) is assigned to carry out the budgeting assignments.

  12. Incremental vs. Zero-Based Budgeting

  13. Continued next slide…..

  14. Next lecture: Budget preparation.

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