Budgeting and Management for Organizations
Effective budgeting can mean the difference between an organization’s success or failure.
The budgeting process can seem overwhelming, and some employees may feel it is a waste of time. However, when leaders take the time to develop budgets that are aligned with their organization’s mission and values, the budgeting process can unlock value and help the company maximize its effectiveness and profitability. What is needed is a way forward.
In this informative how-to book, Geary Reid draws from over 20 years of experience in business to explain different types of budgets, why they are important, and how they are structured. According to Reid, budgeting is not a top-down process but requires the input of all the members of the organization. Beginning with the master budget at high level, Reid examines the supporting budgets that flow into it, such as those for sales, marketing, depreciation and amortization, and capital expenditures, and he provides a step-by-step process for putting it all together. Each step in the budgeting cycle—from budget preparation to approval, execution, and evaluation—is explained in easy-to-follow detail.
Reid then goes on to lay out a systematic process for evaluating the performance of employees and managers, covering such topics as integrated information systems, key performance indicators (KPIs), and auditing and quality controls. By applying repeatable, standardized methods using the right data, leaders will have the tools they need to create a durable pathway to organizational success.
Budget preparations may seem to be a challenging exercise for many leaders; however, it is unavoidable, as most organizations need budgets to plan for their future. In the absence of a comprehensive budget, organizations can experience some success at first, but it will not be sustained. Additionally, the leader’s direction will lack coordination, and the organization’s resources will not be properly utilized. This literature will provide leaders, owners, and directors with a complete guide to preparing the entire organization’s budget, as well as how to review the performance of the leaders, their departments, and the organization as a whole.
This literature is divided into two sections. The first addresses the mission and strategic direction of the organization. If the organization does not have a mission, objectives, or goals, leaders will be unclear as to why the organization exists and what it plans to do. A definition of budget and types of budget are also explained, since some persons are confused about the relationship between personal and organizational budgets.
The phases in a budget cycle are explained, and examples of each phase are examined in a real-life environment. These examples will assist employees who did not receive formal training on budget preparation or were never involved in this task. The master budget is the overall projection of the organization and is compiled from a number of smaller budgets, including the revenue budget, which is critical to the success of the organization. This budget is oftentimes prepared before some of the other departments’ budgets, since without enough funds, the organization will be unable to execute many of its strategic plans. The purchases and production budgets are also important, since they provide the cost of making products and services available to the customers.
In the absence of a marketing plan, the marketing budget may not be aligned with the organization’s strategic direction. The marketing cost must be carefully allocated in the promotion mix budget, so as to attract and retain customers. The employment budget must be planned according to the number of employees that the organization needs for the budget year, since they will assist the organization in fulfilling its mission. Utility, repairs and maintenance, professional and depreciation cost budgets are also critical to the completion of the master budget.
Section B of this literature will focus on how to evaluate the performance of the leaders, their departments, and the entire organization. Leaders report to the owners or Board of Directors, while audit and quality controls provide the checks and balances to ensure that the leaders have executed what they budgeted for the fiscal year. An Integrated Information System is instrumental to assist leaders in compiling their monthly reports and provide the owners and directors with regular feedback on the performances of the departments and Strategic Business Units. The current year’s actuals will be measured against the budgeted information for the same period to evaluate the organization’s performance. Leaders whose performances are below expectations must be given the necessary support to aid improvements, while leaders whose performances are outstanding must be rewarded and acknowledged.
While budgeting may seem like a challenging task for business leaders, it is a necessary and unavoidable process for successful organizations. In this book, author Geary Reid provides step-by-step guidance that leaders can follow to develop, implement, and evaluate comprehensive budgets for organizations of all types and sizes. Additionally, he lays out a detailed framework for evaluating the performance of employees and managers to ensure their actions are always aligned with the organization’s mission and objectives.
During a career spanning more than 20 years, Geary Reid has guided many business leaders in developing organizational strategies, developing budgets, and implementing performance evaluation methods. He seen how organizations can flourish when budgets reflect the organization’s values and when leaders work with internal auditors toward a common goal. With this book, he hopes that his insights will inspire leaders to take accountability in making their organizations more profitable and successful.
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