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Are you in budgeting purgatory?

We're got a 31 December year-end and are going through the annual budgeting purgatory on AccountingWEB. Our publisher is currently spreadsheet-wrestling with the MD and FD over his investment plans for next year.

Are you going through the budgeting rounds at the moment? And if so, how are you finding it?

Have you got any ways to avoid the game-playing and conflict that seem to be inherent in the process. What tools do you use and how suitable are they for the job? Have you got any techniques, such as rolling budgets or collaborative online planning, that bring more value?

Are there ways to get through the process and what tips can you suggest to make it easier?

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By 3569787
03rd May 2016 18:00

Is it a waste of time??

.

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I agree whole heartedly.

Spent several years wasting a lot of time on budgeting, in the end i just used to knock them out in an afternoon and report them upto group and shove them in a draw.

Pointless.

I used to concentrate on getting managers to ask "do I need to spend this?" not "is it in the budget?"

I found managers spent a lot less without a budget than with one as they had to be prepared to be challenged about any cost, not just if the total exceeded an arbitrary budget.

The only practical issue was performance related bonuses which applied to some staff.

i should point out his went down like a lead balloon at group level.

Anyway this wont help Robert. Just make it up and go home it will be no worse than if you spend all night on it.

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Waste of time? Shouldn't be

I can think of two main problems off the top of my head:

1. Self interest - people tend not to think what is best for the company, even at director level, but what will be best for themselves. Either that is a problem with the corporate culture or it is a problem with individuals and the recruitment process (or both).

2. Purpose - what is the purpose of the budget in your business? Is it a prediction, is it a goal, an aspiration or a contract between the company and budget holders? If the purpose is not agreed and communicated you are likely to get an odd result.

In a large organisation sales budgets are often under-stated so that they can be exceeded and commissions/pats on back are earned, while expense budgets seem to account for impending hyper-inflation or some other unlikely and unwarranted contingency. Such a budget might show huge losses for the company so that the process need to be continually revisited. That isn't the fault of 'budgeting' but the way that you do budgets in your company.

Address the issues above and you will have a less painful process and something that is useful at the end of it.

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27th Oct 2011 22:03

Farce

I agree that in most organisations budgets are a complete waste of time.

Unfortunately, sometimes budgets need to be agreed for certain expense holders. It makes sense to go through some estimates to determine allocation of resources based on certain events happening. What happens in most companies are budgets based totally independently of any other events to arrive at a budget and then when budgets are compared with actual there's usually plenty of reasons to explain the differences. In other companies I've seen budgets that start off with totally unrealistic sales and then use expenses and capital expenses based on these sales and when they compare fantasy with reality they ignore the budget which was created with great time and effort. It amazes me why many companies go through with this farce each year. If a company is wanting to set budgets they need somebody in charge of the budget setting process who insists on a correct way of doing it. Unfortunately, nobody with sufficient authority sets out a sensible way of doing a budget and there's nobody who will stand up to the fools who come up with the figures. If anybody with common sense tries to explain that they can't provide a sensible budget without knowing about other people's plans the response is usually: "We haven't got time for that. Just give me some some numbers and we can get this thing finished".

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28th Oct 2011 07:56

I have always thought

that these guys have it about right:

 

http://www.bbrt.org/beyond-budgeting/beybud.html

 

I prefer a quick budget based on last year adjusted for known changes/effects which is used for monitoring for the unexpected and/or the accounting hiccup but the driver is the forecast.

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