In my budget cycle there are 9 steps, with procedures in each to create, implement, and monitor an organization's budget.
1. Prepare and Plan
- Develop Timeline: Establish a timeline for the budget cycle, including deadlines for each phase.
- Analyze Environment: Review internal and external factors affecting the budget, including economic conditions, industry trends, and organizational constraints.
- Set Objectives: Define the financial and operational goals for the upcoming period based on the organization’s strategy and risk appetite.
- Allocate Resources: Determine the allocation of resources in alignment with strategic goals.
?2. Validate Strategy & Develop Budget
- Involve Stakeholders: Engage various departments to contribute their budgetary needs and projections.
- Develop Models. Develop causal operational and financial models that reflect resources and processes.
- Gather Information: Collect data on past performance, current financial status, and projections for revenues and expenses.
- Draft the Budget: Create a preliminary budget document, including income statements, balance sheets, and cash flow statements.
- Review and Adjust: Review the draft with senior management and make necessary adjustments based on feedback and analysis.
?3. Approve Budget
- Perform Internal Review: Present the budget to internal stakeholders, such as department heads and executives, for review and feedback.
- Revise Budget: Make revisions based on feedback and additional analysis.
- Approve the Final Budget: Obtain final approval from top management and/or the board of directors.
?4. Implement
- Communicate: Communicate the approved budget to all relevant departments and stakeholders.
- Allocate: Allocate funds and resources as per the budget.
- Operationalize: Integrate the budget into the financial system and operational plans.
?5. Monitor and Control
- Track Performance: Regularly monitor actual performance against the budget through financial reports and variance analysis.
- Analyze Variances: Identify and analyze variances between budgeted and actual figures, determining causes and implications.
- Take Corrective Actions: Implement corrective measures if there are significant deviations from the budget.
?6. Evaluate and Get Feedback
- Evaluate Performance: Evaluate the overall performance against the budget and the effectiveness of the budgeting process.
- Collect Feedback: Gather feedback from stakeholders on the budgeting process and its outcomes.
- Document Lessons Learned: Document lessons learned and areas for improvement for the next budgeting cycle.
?7. Adjust and Reforecast
- Reforecast: Adjust the budget as needed based on changing circumstances, such as economic shifts or new strategic priorities.
- Make Mid-Year Adjustments: Make mid-year adjustments if significant deviations occur or if there are major changes in the business environment.
?8. Report
- Prepare Periodic Reports: Prepare periodic financial reports for stakeholders to provide updates on budget performance.
- Create a comprehensive report at the end of the budget period summarizing performance, variances, and outcomes.
?9. Archive and Document
- Keep Records: Maintain detailed records of all budget documents, reports, and supporting materials for future reference and audits.
- Perform Historical Analysis: Use past budgets and performance data to inform future budgeting cycles.
These steps will ensure a structured approach to budgeting, helping organizations plan effectively, allocate resources efficiently, and achieve their financial and operational goals.
What is your budget process?
#accountingandaccountants #budgeting
Cost Accountant | Proven Editorial Advisory Board Member | Helping Companies Translate Their Business Goals into Reality
3 个月Raef Lawson don’t forget to reflect to see how accurate you were so how comprehensive where the assumptions and goals were for the organization. This will help you in the future to realize where you were different and why so not to repeat
Associate Professor Of Accounting at Eastern Kentucky University
4 个月Good primer. Still, much like the PA framework, I find it better to view budgeting as a larger planning system than a singular process. It's a living, breathing (and critical) system with forecasts, decisions, feedback, and response.
These are good technical steps, but if they are not done using causal information and reflecting the individuals and operation throughout the organization, you'll have control with no commitment to the goal. Consistent use of PACE information and the PAF (frameworK) create the right environment for commitment and achievement.
President - Society of Product Cost Engineering & Analytics (SPCEA) Sr. Leader | Consultant | Board Member specializing in cost and quality optimization of electronic assemblies and semiconductors.
4 个月Very thorough and well thought out. The graphic is also helpful for a quick refresher.
Owner at Kimat Designs
4 个月This is very helpful. Even in a small business, like mine, I can learn so much from these well organized steps and procedures.