As the year draws to a close, many of you have started planning for next year. Your budgeting process is a very important tool in planning for, and ultimately achieving, your business goals. A budget is your business plan in writing and spelled out in dollars. The purpose is to allocate resources and control spending so every decision made drives the company in achieving its goals.
There is no one way to prepare a budget and you should prepare yours in a format that is most useful for your company. Many of you are probably dissatisfied with your current budgeting process. It’s not the budget itself, but problems within your company culture, such as not empowering your employees or a lack of accountability, which make you question the value of a budget. One way to correct this is to revise your budget mechanics so that one person is responsible for each line item in the budget. Don’t make the mistake of giving your employees responsibility without the authority to take action. An effective budgeting system is one where people are held accountable and empowered to make smart decisions and control costs. When a company culture exists in which people are both empowered and held accountable for their results, the budget becomes a tool for implementing your plans.
See also “Importance of the Annual Meeting“