The size of the budget can quickly lead to competitive or status thinking among managers ('Whoever has more budget is more important'). Instead of rewarding the economical use of resources, this encourages departments to use up the budget in the following year, regardless of whether measures make sense or not. However, it can be counterproductive if you simply cut the funds that a department has not used from next year's budget plan. Money and resources should be used as efficiently (without waste) and effectively (to achieve objectives) as possible. Budget planning should be realistic and match the expected success of the company. set realistic goalsĭo not increase the goals you want to achieve with your budget to immeasurable proportions. As soon as you know the causes, you can initiate effective countermeasures or plan more budget in the future to achieve your goals. If there are major deviations from the budget plan, you should find out whether there have been significant changes within or outside your company that you could not foresee in your forecast. Do you still have money left over or have you already exceeded your budget? Are the targets you set still achievable or have they already been achieved? 2. Towards the end of the current financial year, evaluate your company's performance based on the last budget plan and compare your forecast at that time with the actual figures. The following tips assume that an initial budget plan already exists or that a comparison of budgets and expenses/costs from previous years is possible. Regardless of which approach you choose, there are a few points to bear in mind when creating budget plans. Top-down, bottom-up or both? 7 tips for the perfect budget plan Finally, the management level must review and approve the budget plan. The department/project managers then develop sub-goals, measures and concretize the budget planning. Countercurrent procedure: The management sets targets, but does not go into detail regarding budgeting.They add up the sub-budgets, compare them with the overall budget and determine what is approved. Bottom-up: Here, the department/project managers themselves determine what budget they need for their tasks and pass the budget planning on to the decision-makers.Top-down: The management determines the scope and distribution of the budget and the department/project managers then plan the measures that they can implement with it.What is the best approach to budget planning? There are three procedures that have proven particularly effective: Initially, a simple table may be sufficient for an overview, but in the long term it makes sense to use a database with more functions for your budgeting. However, the further into the future the planning horizon is, the more difficult and uncertain it is to make an accurate forecast. This helps you to make long-term business decisions that will drive your company forward and ensure its success, such as opening new locations. Strategic budget planning for the next two to five years is also quite common. You use the data from the current and/or previous financial year to derive forecasts for future developments and distribute the budget.

In principle, budget planning is carried out for the future, usually for the following financial year. Operational budget planning is part of short-term financial planning, in which you estimate your future income, expenses and costs. Budget planning goes hand in hand with strategic corporate planning Budget planning can have a motivating effect on your employees, as they can keep an eye on the targets, measure success and be rewarded for it. With a binding budget plan, you can also ensure that your managers define clear goals and take efficient measures to achieve them. © MclittleStock / Adobe Stockįorward-looking budget planning helps you to allocate money and resources sensibly to departments and projects and thus achieve your business and project goals. Budget planning is essential for your company.

Strategic plan budget template