Key Factors/ Processes For The Successful Establishment Of Budgets

What Are The Key Factors/Processes For The Successful Establishment Of Budgets:

  • There should a clear effective communication of the company’s objectives and strategy to those responsible for preparing budgets.This is quite critical otherwise there is no proper focus on the overall company’s goal like achieving X revenue or XX profitability and others.The strategy document should be clear as to the overall objectives of the organization and should able to reflect the impact on the various division.
  • There should be a clear effective communication of the overall and detailed procedures for preparation of the budgets.Preferably a budget manual should be set up to communicate all the essential procedures like the time line to complete the budget, formats to be used, organization chart and others
  • Determine the key and/ limiting factors which normally comprise sales to be achieved, availability of materials, capital and others
  • The organization need to ensure the proper setting up of budget centres or department. Who to do what is the basic otherwise the relevant managers might be confused of their roles.
  • There should be availability of adequate/detailed accounting records. If the accounting systems does not maintain the correct detailed past records of transactions, it will make the forthcoming budgeting very difficult and cumbersome
  • It is important to set up a proper budget committee to coordinate all the work connected with the budgets.This committee can assist to:
  • formulate a general program for preparing the budgets and exercising overall control,
  • review and co-ordinate the budgets,
  • negotiate budgets with line managers
  • finally accept the final form of the budgets

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