Budget planning is a complex process in the company in which many framework conditions play a role. When planning the budget, you have to ensure the following points in advance . You have to clarify or fulfill these.
Budgets should contribute to the company’s success
You should use the company’s financial and human resources where they bear the most fruit. The principle of economy applies. The decisive factor is that the budget and the resources are used in such a way that the corporate goals are achieved as well as possible and that no resources are wasted unnecessarily. Before budget planning, the corporate and divisional goals must therefore be clear.
The right distribution of budgets is difficult
It is difficult for decision-makers to recognize and assess where they can best use the available resources. One reason is that you are only informed very selectively. The budget recipients just inform that their budget demands are met. The process of budget planning and budget distribution should therefore be transparent. If you want to have a budget, you have to say openly what for and why.
Budgets are based on assumptions about future developments
Budget planning relies on forecasts of future developments. Even the most sophisticated methods and procedures for analyzing profitability are based on assumptions about the future. These are often too optimistic, sometimes too pessimistic depending on the interests of the protagonists. Budgets must therefore be regularly reviewed and adjusted. Budget planning is an ongoing process and best app to track investments can help with the process.
Budgets are a status symbol
Managers in companies fight fiercely for the highest possible budget. It is intrigued, politicized, calculated, exaggerated or done badly. Anyone who interferes with the balance of power fuels envy, resentment and conflicts. This leads to demotivation or even sabotage. It must be clear to everyone that fighting over budgets can lead to conflicts. Management must prepare for this and resolve conflicts.
What budgets and budget planning should do
The aim of the decision-makers is to place the budget planning on as objective as possible and to gain acceptance and commitment from the budget recipients concerned. Numerous methods and tools for budget planning support this.
What is important in the budget planning process is that the strategic goals of the company are the benchmark for the distribution of the budget. Budget planning must be flexible and dynamic so that it can adapt to the current situation in the company. You will not waste money unnecessarily.