What is a budget?

A budget is a tool for converting plans into reality.

It covers the process of

• defining objectives;
• forecasting expectations of sales, profits, and expenses of every sort;
• deciding what actions will best help the company achieve these targets;
• determining how much money will be needed to support these actions; and,
• finally, providing a way to monitor whether the actions chosen are the most appropriate at the current time, or whether they need to be modified in some way.,

FEATURES OF A BUDGET

A budget should include the following components to be effective:

1. Clearly defined objectives, both short- and long-term.
2. Estimates of revenue amounts.
3. An analysis of revenue payments:  how far do they lag behind payment of expenses?
4. Estimates of expense amounts and timing of expense payments.
5. A list of ongoing direct and indirect costs.
6. A cash budget to predict cash flow over time.
7. Procedures to monitor the progress of the budget.

Budgeting for Future Success

Why budget?

Budgeting forces companies to anticpate and prevent problems, create strategy, measure results, motivate staff, and save time.

What is it?

A budget covers the process of :

• defining objectives;
• forecasting expectations of sales, profits, and expenses of every sort;
• deciding what actions will best help the company achieve these targets;
• deciding how much money will be needed to support these actions; and
• finally, providing a way to monitor whether the actions chosen are appropriate or whether they need to be modified.

When should a budget be created?

There are no fixed time periods a budget should cover.  The longest range budgets can cover a period of between three and five years.  A more typical period is one year, to coincide with the company's financial year.

How should a budget be created?

DEFINE OBJECTIVES by

• understanding your company,
• listening to company sections,
• summarizing core aims,
• setting financial targets, and
• defining strart-up objectives.

GATHERING INFORMATION by

• estimating sales and revenue,
• estimating expenditure,
• estimating profits/loss, and
• challenging the figures.

CREATE A CASH BUDGET.  No final (or master) budget can be complete without a cash budget that will

• show how money will be moved to and from the business bank account.

How should a budget be monitored?

SET A TIME PERIOD.  Although some companies operate on an annual budget, most allow for quarterly, if not monthly, observations.

REGISTER ACTUAL RESULTS.  Write down the results achieved by the company and compare them with projections.

CATEGORIZE VARIANCES.  Divide into price, volume, and timing.

ANALYZE VARIANCES.  Ask yourself in each of the categories, what could have led to the miscalculation.

REVIEW PROCESS.  Finally, review the way the budget was put together.  It may be that the objectives were unrealistic or not defined specifically enough.

An example of project planning and budgeting

Uncertainties
This section discusses the degree of uncertainties in respect of a development of the Southeast Shore of False Creek, based on the Creekside Landing concept. Please note that the cost estimates quoted are order of magnitude, and detailed design will be required to enable more reliable cost estimates to be produced.

Cash Flow and Capital Requirement
A substantial expenditure will have to be made before revenue can be generated. A summary of the projected expenditures and capital requirement is as follows:

Read further here: http://vancouver.ca/ctyclerk/cclerk/970424/kwokreport/report07.htm

Budgeting for Future Success

Today's world and workplace are considered a "global village." Telecommunications and air transportation make finance, technology, and labour available to a world economy. Increased knowledge and skills will be required to compete in the changing workplace created by the world economy.

To be prepared for a career in this new world, people will need a variety of skills. The use of budgets is one such necessary skill. Allocating money, solving problems, and making decisions are skills needed to create and use either a personal or business budget. These skills are also critical for people who want to be ready to achieve personal and professional success.

If you learn good budgeting skills and are able to apply them to different situations, people will take notice. At your current job, you can impress your employer by suggesting possible budgeting improvements. If you help your boss now, he or she will help you later. Maybe your boss will write you a good recommendation for a future job. Or perhaps he or she will help you find a good job when you finish the present posting. Whatever the case, using your budgeting skills now can only benefit you in your future career.

You will also find that balancing your current budget, no matter how little money it may involve, will help you balance your personal budget in the future. You will be making more money when you begin your career, but balancing your budget then will involve the same steps that it does now. That way, when you do begin to earn more money - and possibly even have to balance a budget that includes a spouse and children - you will be well prepared to do it.

Success with budgets can be achieved. Many people start with basic personal budgets when learning to budget money. Tracking budget items and adjusting the budget over time gives experience that can be used with more complex budgets. Budgeting your allowance prepares you to budget when you have income from a job, for example. And budgeting part-time earnings prepares you to budget for your own business someday.

A budget may not make you rich. But when used with creativity, budgets can provide a sound basis on which to make decisions that will be easy to live with.

Good budgeting skills will get you noticed in the highly competitive workplace. Questions to ask yourself:

• How can knowledge of budgetting help you in your career?


• Would budgeting help you if you owned your own business?


• Would a budget be useful if you had a family of your own?