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Prepare a budget for your organisation



Zig Ziglar said, “If you aim at nothing, you will hit it every time.”If a business operates without a budget it will be difficult to assess the performance of such an entity. Zig Ziglar said, “If you aim at nothing, you will hit it every time.”If a business operates without a budget it will be difficult to assess the performance of such an entity. Any business that wants to grow and that wants to monitor its performance should have a budget to use as a yardstick of its performance and also in monitoring how its managers are performing.A budget is a comprehensive quantified financial plan of action, for the forthcoming accounting period, for achieving the financial and operational goals of an organization.

A budget is a tool an organisation will use to implement its strategic plan. A budget helps an organisation develop its objectives for the acquisition and use of its resources. Management will use the budget as a benchmark  to  ensure  planned  objectives  are  attained. There are many benefits that can be derived from having a budgeting. A budget formalises the coordination of activities between departments while at the same aligning these activities to the organisation’s strategic plan.

A large organisation consists of many departments, people and parts. These components need to be coordinated to work together in a cohesive fashion. The budget is the tool that communicates the expected outcome and provides a detailed script to coordinate all of the individual parts to work in concert.A budget enables the application of the principle of responsibility accounting in which a manager is held responsible for revenues or costs in his area of personal responsibility.

When budgeting, a manager will be allocated revenues and costs relating to an area that he is responsible for and to revenues and costs that he can control. Thus with a good budget the performance of a department or a manager can be monitored well. Having a budget improves performance evaluations since it will provide a common base for discussion on how well the manager met his goals and in certain instances why actual results were away from the original budget.

A budget is the tool that provides a mechanism for identifying and focusing on deviations from the plan. The budget will provide the benchmarks against which to measure success or failure in meeting goals and will therefore facilitate timely corrective measuresA budget ensures that managers will make decisions that are for the good of the whole organisation rather than a department. With a robust plan in place, all decision makers will be working towards the same goal.

Allocation of scarce resources will be done in line with the budget which ensure that the organisation achieves its strategic goals. If managers understand the big picture they will appreciate that their individual needs are subservient to the larger organizational goals. A good manager will therefore support the overall plan and move ahead to maximize results for the overall entity rather than spend time bickering on having more resources allocated to his department.

The budget process helps in ensuring that every department agrees to the organisation goals and therefore everyone will strive to reach those goals.Budgets help to avoid failure. A good budget should be linked in to the strategic plan and used as a tool to translate strategic plans into specific, action-oriented goals and objectives. By adhering to the budgetary guidelines, an organisation is likely to achieve its identified goals and objectives thereby guaranteeing success.

Another benefit of budgets is that they can be helpful within the system in identifying constraints and bottlenecks. A carefully prepared budget will always consider capacity constraints which managers can address well in advance. A budget helps you to see changes you need to make ahead of time as you see problems or other issues to address ahead of time, for instance, when you should hire or when you have to move to new premises or when to acquire new equipment or materials.Creating an effective budget can be a daunting task so you would need to enlist the services of an experienced person to prepare a budget.

For a budget to be effective you need the participation or involvement of key staff in the budgeting process to ensure that there is buy-in. A participatory budgetary process is an important part of the employee-management communication process which leads to group acceptance of the budgeted goals. A key concept about budgets is that they must be perceived to be fair and reasonable by employees whose performance will be compared to these goals.

So by involving the team, it gives them the opportunity to have their opinions and ideas heard and to be able to share the organization’s vision. This involvement will get their buy-in and it will lead to greater success.    Use of technology can be very crucial when creating and managing a budget. One doesn’t need to have the budget on the organisation’s server. The budget can be developed and be accessible anywhere through the use of cloud computing and instant communication.

The use of technology can also allow for quicker and accurate analysis of actual results vis a vis the budget enabling quicker resolution of identified issues.  l Stewart Jakarasi is a business and financial strategist and a lecturer in business strategy (ACCA P3), advanced performance management (P5) and entrepreneurship.

He is the Managing Consultant of Shekina Consulting (Pty) Ltd and provides advisory and guidance on leadership, strategy and execution, corporate governance, preparation of business plans, tender documents and on how to build and sustain high-performing organisations. For assistance in implementing some of the concepts discussed in these articles please contact him on the following contacts:, call on +266 58881062  or WhatsApp +266 62110062  .

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