At the end of every fiscal year companies tallying up their scores to see how they’ve finished. Unlike the game of golf having the highest score is cause for celebration, being in the black you’ve done well and deserve some congratulations. If there isn’t a soirée going on in your business maybe it’s because you didn’t plan for a year-end party, and that could be the direct result of your failure to budget.

To be successful in business, budget cannot be a taboo word in your company. One of the skill sets you as an owner or manager need to possess is the ability to plan ahead, this includes that ability to budget. If you’re a visionary and lack budgeting skills, then stop reading and go find someone who is. So before we discuss budgeting tips, let’s first discuss what a budget is and isn’t.

What a Budget Is:

A budget is a proposed plan to monitor financial activity over a period of time. A budget is a planning tool an owner and/or manager should be using to measure trends over a fixed interval; this includes inflow, outflow, and asset/ liability growth. Finally a budget is a resource to forecast an assumed outcome.

What a Budget is NOT:

A budget is not the law; it is not to be used as a means of accountability and to ensure financial integrity. A budget is not to be used a ceiling to spending, and a method of absolute control. And finally a budget is not a guarantee so financial and business success.

So now that we have defined what a budget is, let us get to how to properly use and understand how a budget actually benefits a company.

The budget should be put together and approved at least 1-2 months prior to the start of the new fiscal year. This will allow for key employees to look at what the company is trying to accomplish and what is being aimed for. So for this to happen planning will need to take place approximately 3-6 months before the start of the new fiscal year, this of course depends on the complexity and size of the company.

The budget should reflect the direction that the company is headed in; this of course is handed down by the CEO and/or Board of Directors. Everything about the budget should point towards the strategic plan the company has adopted. The budget should also be multifaceted, not only should you include a Profit & Loss operating budget, but also a Balance Sheet budget to help track cash inflows and outflows.

Finally the budget should be realistic. An exponential increase in revenues without any foundational proof or purpose can lead to fiscal year failure. Again remember the budget is for mapping out trends in an attempt to forecast growth or decline. All the pieces must fit, in business there is usually a cause for increased revenues (hint: check for the reason in your expenses section!).

To summarize let’s recap the key points:

1. Budget is not taboo

2. Budget is a proposed plan

3. Budget is not the law

4. Approval should allow for time to disseminate throughout the company

5. Reflects the strategic plan and heading of the company

6. The budget should be realistic, for all growth there should be a reason



By: Jayson Cardwell

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stage is to ensure the organisational chart clearly represents the management responsibility of each department and activity area. Financial accountancy and cost accounting should be integrated and aligned to enable detailed management information reporting and accurate financial records for each activity.

The cost and management information reporting system should be focused upon critical items where management action influences the financial result. Before setting the revenue budget the managing director, advised by the financial director or management accountant, should identify all crucial elements of the business that may have an impact on future financial performance.

Having established the departmental responsibility for producing the budget and the critical items that will be monitored the accountant should prepare budget templates and hold pre-budget meetings with the departmental heads. At these series of meetings the department heads will receive the budget templates and discuss the detail required and the timetable for submission.

Management responsibility for producing the departmental budget is crucial to achieving the financial targets and can be greatly enhanced by relating bonus payments to the level of achievement.

The work of the management accountant is to receive all the departmental budgets and put them together in a final budget for approval by the directors. Throughout the budget approval process adjustments are likely to be required to reach the overall financial objectives but once finalised each budget should be signed off by the department head responsible.

Simply taking the previous years numbers and adding a percentage is a simple solution to preparing the next year budget but is likely to be of poor quality. Quality comes from department heads and managers generally taking responsibility for their own areas of activity and agreement to the detailed financial parameters.

The sales budget critical areas are the list of individual products, additions and deletions from the existing product range, the volume of sales by product and the selling price including any proposed changes. In addition all sales channels, advertising plans, promotion and marketing campaigns should be evaluated to support the sales plan.

Sales administration costs including representatives, sales office and overheads of the sales function need to be evaluated and related directly to achieving sales budget. The higher variability included in the sales department costs can be a distinct advantage. For example, relating the numbers to be employed directly to the sales volume to be achieved, staff bonuses payable on achieving the objectives.

The production budget should start not from the numbers of people employed in the past but be set according to the numbers required to produce the budgeted production volume of the future.

The budget approval process is an ideal opportunity to consider in detail the business overheads, staff numbers and qualities required to drive the business forward. Fixed costs may be incorporated into some areas to ensure the administrative costs are controlled.

For example, a works canteen may have a fixed cost to be paid by the business each month. It would then be the responsibility of the canteen manager to provide the employees with the service required while budgeting to set the price of those services at a level which ensured the contribution from the company created a break even position each accounting period.

Too many businesses set budgets for the future based upon historical costs and sales volumes which are divorced from management responsibility. By budgeting with individual management responsibility for achieving the financial targets the overall performance of the business can be better managed and controlled to achieve the desired financial performance.

A prime responsibility of the management accountant is to evaluate the critical areas in cost accounting, ensure those areas are aligned to management responsibility and present the revenue budget compared to the financial accounts to enable the organisation to achieve and extend its financial performance.



By: Terry Cartwright

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Money Budgeting is a phrase that either bores them too much, or makes them depressed. But, this is how successful people deal with money - they budget. It’s a lesson that must be learned to succeed financially in this life. Here is some helpful information.

Many people are lured into the trap of spending more money each week than they are bringing in and most people are doing this without even realizing it. The main reason this happens is because we are no longer taught or remember how to budget our money. With the introduction of credit, it has become easier to use money that you don’t actually have.

This lack of money budgeting in today’s world is beginning to reach a cataclysm with many families, and individuals who are now finding themselves with severe debt problems and little knowledge about how to turn their bleak situation around.

Even with all of the bad debt write-offs, banks are more than happy with the way things are. Banks build in their own risk factors based on bad debt in their interest rates to give them profit regardless of bad debt write-offs. Simply put, those borrowing money are paying for their inability to budget effectively.

Tips to Effective Money Budgeting:

The basics of budgeting start with you listing incoming money over a period of time, such as a weekly, monthly or fortnightly, then listing the outgoing money, such as mortgage payments, car re-payments, credit cards and so on. Money budgeting also has many other factors used to make it effective, including keeping a constant eye on how your budget is doing and changing it to accommodate unexpected problems without overspending.

Keep all of your receipts and account for what has been spent. Use this to make calculations as to where your money is going and for what. Expenses can be divided into four main categories. These are:

-Housing: mortgage, rent, utilities, property taxes, insurance, etc.

-Work: transport, parking, work clothes, lunches and if you have children, day care

-Living: food, clothing, medication, insurance, etc.

-Personal: entertainment, newspapers, magazines, alcohol, gifts and education, etc.

Once you have categorized all of your bills, take out a blank piece of paper and a calculator. Figure out what is being spent each month on these categories and what can be cut out of the budget to allow more money to go toward bills or improving your financial situation.

Many people get so used to luxuries, they turn these things into fixtures in their weekly, fortnightly or monthly spending habits. By weeding these expenses out or making them a luxury again that is only enjoyed occasionally, you can also save quite a substantial amount of money. When you go through your spending habits, you will be able to calculate how much you are actually spending on these things.

Don’t forget that a contingency fund should always be factored into any money budget. This works out to be around 10 % of your income. A contingency fund will benefit you when you need it the most, such as when you lose your job or have an unexpected expense such as plumbing go wrong in your home. This contingency fund should be kept in a separate savings account and only accessed in emergencies.

Motivation Is The Key:

Motivation is very important when you are budgeting. As an incentive to create a budget and stick to it, remember that the only way to regain wealth is by spending less money than you are receiving. The only way to spend less and do more with your money is to learn how to effectively budget it and stick to your plan.

Once you start to see the benefits of your budgeting and are rewarded with more money in your bank account after you have finished paying out, you will be more encouraged than ever to budget your money.

Another way to teach yourself to budget is to give yourself a solid incentive to stick to it, and make your budget work. You may make it your goal to get your finances in order, so that you can take a vacation or get something that you and your family really wants. Place reminders on your fridge or in your wallet. By doing this, you will be reminding yourself of the reason you have decided to sacrifice some of your luxury spending.

Although this sounds great, when you budget, you will have to learn to set aside any emotions that you may feel toward your budget. Examples of emotions getting in the way and interfering with a well planned budget is when you have to cut out the things that you want, such as weekend breaks away, toys for your children or new furniture, for a while, until you have arranged your finances for the better better.

If you have a family, try to keep them involved in your money budgeting and where the budget needs to be tightened to benefit everyone to exclude non-essentials, explain to family members why budgeting is important. This will help to educate those around you about the importance of budgeting and how budgeting can help you all obtain the things that you want, such as luxuries, without them being a financial burden.

Another trap many people fall into is getting into the habit of ‘keeping up with the Jones’ regardless of their own personal financial situations. After all, money budgeting is about your personal set of circumstances and your personal finances, not someone else’s. Just because your neighbors have just bought the latest model car or had cable television installed, doesn’t mean that you have to, pay attention to your budget and let it be your decider on whether you can afford the things that you want.

Budgeting is a vital skill needed to control your finances and avoid getting into serious debt. By educating yourself on how to budget effectively, taking the time to carefully plan a good budget and monitoring it regularly you will be able to keep yourself and your family encouraged to stick with it.

Set achievable goals and even though, at first, money budgeting may seem tough, it is the only way to have the things that you want, as well as a secure financial future.



By: Ken Black

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how many times you ask yourself where all my money gone? you know no matter how much money you earn you might find yourself in debts. and this due to spending without control. some people have a filling that they have unlimited supply of money in the bank just passing the credit card and you can buy everything you like. but one day you came to a point where you understand that something has to be done with your budget planning.

i have seen all kind of personal budget planners. i thought maybe the budget planner will somehow give me more money in the pocket. well i guess not. The bottom line is, a paper personal budget planner will work as well as a fancy computerized one. It isn’t about how the personal budget planner looks, its about using it. And for most people, it is something we don’t really like to do either with personal budget planner or without it.

so it seems like i must live according to my budget. and if i know my budget, i can tell what i need to change in my money spending. a personal budget planner can track my immediate monetary sources and can help me achieve my financial goals.

For me, the problem wasn’t the personal budget planner that I used. it has no problems with it. i thought that my problem used to be that I simply did not use the personal budget planner enough. years ago I was making a lot of money working full time job I was living above my means. But my means were so great that, use of my personal budget planner was not really necessary. but as now i retired and receive only pension allowance. i know that my problem was not that I wasn’t making good use of my personal budget planner.

I felt like I was broke, and always some bill or other payments hanging over me and disturbing my sleep, and I was in some kind of deep trouble. It took me a while to realize that my problems had nothing to do with the personal budget planner. My problems had a lot to do with me making very little money, however. It was then that I knew that I needed to take a second job to really balance my budget. After a lot of looking, I found a job that pays the bills. i found a part time job with less salary, Now, even when I do neglect my personal budget planner for a week or so, it is okay. You see, I still have some money in my budget to plan!



By: Alladin Alon

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