FREE online courses on Refresher on Financial Planning - Chapter 5

 

Making the Budgeting Process Work

 

Now that we understand what goes into financial planning, it is time to focus on how to make the process into a value-added activity. Many organizations are attempting to re-engineer budgeting practices since budgeting is usually a non-value added activity; i.e. it does not add value to the decision making process. The goal is to make the entire financial planning process into a decision support service within the organization whereby the benefits of the process exceed the costs.

 

In order to fully comprehend the problems associated with budgeting, let's quickly list the top ten problems with budgeting according to Controller Magazine:

 

1.      Takes too long to prepare.

2.      Doesn't help us run our business.

3.      Budgets are out-of-date by the time we get them.

4.      Too much playing with the numbers.

5.      Too many iterations / repetitive tasks within the process.

6.      Budgets are cast in stone in a constantly changing business environment.

7.      Too many people are involved in the budgeting process.

8.      Unable to control budget allocations.

9.      By the time budgets are complete, I don't recognize the numbers.

10.  Budgets do not match the strategic goals and objectives of the organization.

 

We will now discuss several ways of making budgeting into a value-added activity within the organization.