There Are Several Good Reasons To Create A Budget And To Make It A Good One

By Author: Sulamita Berrezi
Total Articles: 115
Comment this article

There are several good reasons to create a budget and to make it a good one. The reasons are tied to the people who will read and use the budget. Each reader will look at the budget in a different way and do something different with it. If you know your readers, you can make a budget that will impress everyone— and, more important, show how your group is contributing to the organization and therefore approve the funds you need to proceed. If you know how the budget will be used, you will know how to write it in an easy-to-use way. More important, it will help you succeed and show that you are a good manager and that your team is doing a good job. So, let's take a look at your audiences and what they will do with your budget. We can look either at what we did before or at what we are planning to do. In the first option, we review a prior year or years and then make changes where we think the future will be different from the past. In the second option, we look at a written plan of what we are going to do and ask, What will I need to buy? How much money will I have to spend? Both approaches are good and you can start with ...
... either one. However, if you don't have accurate information about the prior year or you know that this year is going to be very different, then you have to work from a plan, rather than from past results. To make a really good budget, it's best to look at the budget both ways. Suppose that you have good, actual expense figures from at least one prior year. Does that mean that it's best to start from them? Not necessarily. Sometimes, it's still better to start from your work plan for the new year. This depends a lot on how much production work you do and how much project work you do. When you're creating a budget for production work, you're probably better off starting from last year's budget. If you'll be working in much the same way, then last year's plan is a good start for this year's plan. However, when you're creating a budget for a project, you're better off starting with your project plan. Because projects are unique, something you've done before is not a good model. Build from your plan so that your budget describes what you actually need to buy, hire, or acquire to succeed on the project. Your budget may be broken into different parts and each part can be done either way based on the past or on the plan. In this chapter we'll discuss the basics of creating a budget from last year's budget.