Setting Budget Goals and Objectives:
Having collected and analysed all relevant information, and made general forecasts as to the key areas of concern / opportunity and special circumstances for the coming year, the next step is to establish goals and objectives which would then form the basis for the actual figures contained within the budget itself.
Leaving aside revenue goals for the minute (given the goal of this module is the understanding of cost controls), some expenditure goals may be:
- Reduce salaries by 10%
- Reduce advertising costs by 25%
- Reduce stationery costs by 50%
Whatever the objective may be, budget goals must be clearly linked to the overall strategic plan of the business and reflect the broader business objectives as outlined in the strategic business plan.
When undertaking budget planning, the key is take those action plans identified and developed in the business plan, and convert them into actual numbers for inclusion in the budget.
A budget that isn't based on goals will not provide the impetus for staff to achieve the broader business objectives set by the organisation.
When setting goals and objectives it is imperative that those goals be achievable. Where budget goals are set too high with no possibility of them being achieved, staff may be demoralised or simply disregard the budget. To ensure credibility, budgets must be achievable.
The challenge for the manager is to set goals that challenge the department or organisation to achieve them.
Other examples of budgets may include:
- Special marketing campaigns
- Business expansion plans (increased staff)
- Refit of existing premises
- Vehicle fleet upgrades
- Total business IT upgrades
It is likely that project teams will be allocated to oversee the planning phases of the project as well as implementation phases. In most cases it will be the responsibility of these teams to ensure that expenditure budgets attributed to the project are not exceeded, and report any discrepancies to management for inclusion (if necessary) in total business budget reviews.