Budgeting and Management for Organizations

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.