Magazine article Management Today

Crash Course in ... Setting the Budget

Magazine article Management Today

Crash Course in ... Setting the Budget

Article excerpt

The FD tells you that operational spending was 20% over budget last year and capital expenditure went through the roof. But there's been a splurge on office carpets and sofas lately as departments resolve to use it rather than lose it. And as the bean-counters set about next year's figures, there's a line of Oliver Twists outside your door. What to do?

Don't panic. Setting a budget is not rocket science, says Chris Jackson, head of the finance and management faculty at the Institute of Chartered Accountants. 'It's really just putting numbers to a business plan.'

Put strategy first. The plan flows from the strategy, which is broken down to goals and targets for each bit of the business. 'You should brainstorm the optimal way to meet your objectives without attaching any pound notes to begin with,' says accountant and trainer Anne Hawkins ( 'If you put the money first, you miss a huge chance for blue-sky thinking.'

Forget last year. It might be a useful reference point, but cutting the pie in the same proportions each year is a recipe for maintaining the status quo. 'You need to be continually questioning the shape of the business,' says Hawkins.

Devolve and challenge. If you want people to meet their budget, they need to have ownership. Every manager should ask all those who spend money how much they need, and to justify it. You'll end up with departmental and company budgets that everyone has signed up to.

Raise the bar. …

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