Budget Management
When talking about the financial affairs of a company, it is very important to touch on the budget. The budget is the future planning table of the company, which includes mutual numerical estimates of income and expenditure that we anticipate to occur in the future and in a certain period of time. At this point, the importance of inventory management, sales tracking, and HR becomes obvious.
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Budget is also an art of cost accounting. It is one of the most strategic and basic tools to be used for management in a company. Business management is a decision support mechanism. The budget has not been realized yet at the time it was made, it is an estimate. It is a systematically prepared financial plan that shows this forecast. Budget management enables senior management, manager to clarify the strategies, goals, and objectives of the company within the company through the budget. Because the environment in which our companies live is similar to stormy seas. They always grapple with waves.
Healthy budget management;
- Which survived all the effects while being thrown up and down in the rough sea
- Thinking about the future through budget management,
- Anticipating,
- Planned,
- It is a systematic tool that numerically everybody can take as a guide, fix it as a pole star and constantly look and determine how close it is to its target.
How Can Companies Implement Budget Management Most Effectively?
When the budget management is done, the basic policies to be followed by the captain who is at the helm of the enterprises are determined. In companies, the boss, senior management, or general manager has the company's general strategies in mind. It is generally in the mind and sometimes in written form.
The right thing is to strategically frame it in a written form. In this context, we ask companies the following questions; “Is every employee from lower to upper levels such as beginners, experts, managers, managers, and directors aware of the goals and the numerical integrities that need to be realized? Do they know the meaning? Are they aware that all this is geared towards achieving the company's strategy? ”.
Thanks to budget management, everyone is aware of their own purpose and works more ambitious, motivated, possessive, and result-oriented. It enables the use of resources to be made much more effective and efficient, especially with the expense and investment budget method. It determines where the resources will be spent. If the resources do not only make an income budget, that is, they are realizing the income and investment budget at the same time (which is the case), the following questions should be asked;
The following questions should be asked;
- What are the operational requirements? How should I plan the workforce?
- What is the level of sales, income, and profit?
- What operations should be carried out to achieve all this?
- How many pieces should be produced from which product, from which product?
- How much should the services or goods to be procured during production be purchased?
- How effectively can I manage the expense budget? How efficiently can I manage?
- What value will this expense create when an additional expense item arrives? If it does not serve other strategic purposes, it means that there is no need for that expense. Even asking this question disciplines the company's resource usage. It means that every prominent expenditure is signed and not taken over. It is the expenditures that serve effective and efficient processes that really create value. It provides a very serious advantage in financing matters. When the budget can be presented on subjects such as banks, stock exchanges, strategic partners, capital partners, meeting with companies such as angel investors, it means that a forecast for the future is presented. In line with the budget, the institution that will make an assessment of the company and give money can make the decision whether to invest or not more effectively.
Budget is short-term financial planning. The 5-year strategy can only be realized as an estimate. The budget to be realized, analyzed, most accurate, and most accurate is a short-term financial plan. One-year budgets are generally made. Avoiding budget management is not just realizing the budget. Budget management is a whole and should be carried out as follows;
- Defining the budget process,
- Creating budget workflows,
- Designing the budget implementation systematic and budget activity model,
- Organization design,
- Creating a new budget structure under financial affairs and finance,
- Time planning (budget start and end dates) needs to be done.
The Basic Principles of The Budget
The point that adds value after the budget is made in the analysis of the budget. It is necessary to compare the financial estimation with the actual realizations, see how much it complies with each other and how much it diverges, investigate the reasons, and take actions with the inferences obtained. A budget on paper cannot be considered to have worked well, it can only be considered to be made formally. The basic principles of the budget are as follows;
- Clarity: Income and expenditures need to be planned in a clear and realistic way.
- Periodicity: Specific periods such as 3, 6, 12 months are prepared in the form of budgets. It must have a beginning and an end. It should cover a period.
- Union: It is necessary to prepare separate budgets for all incomes and cost centers. Separate small budgets to be made for each expense item, cost center, and income should be combined into a master budget and thus the consolidated budget of the final company is obtained. One of the mistakes that our companies often make is to forecast the future of only income and product, and this can be called only income budget. It does not accommodate expenses. It would not be right to describe it as effective management since it does not force each cost center to consider a special budget and does not establish the mechanisms to discipline it numerically.
- Innovation: It is necessary to keep pace with the developing technology. The budget used to consist of static numbers that were not live in excels or tables. In today's technology, it has been alive. There must be a continuous management decision support mechanism. It is a process that must be blended with technological solutions that can be reached with a single button and the budget can be seen when needed. After the system is established in the budget area, digital transformation must also take place.
You can use Prosoftly Business Management Software to manage your business effectively.
