Mar 10
20
It would be unreasonable to expect people to spend weeks preparing a document that will never be looked at. If you are a leader of your company, you certainly would not want to waste employee time and effort in a meaningless exercise. If you are a department manager, there is certainly more pressing work to be done. We all want to believe that the work we perform has value.
But as unreasonable as it is to ask others and ourselves to waste time, often that’s what budgeting is all about. We stay late every night for weeks and place similar demands on subordinates. We rush to meet deadlines, only to discover that the whole thing is being revised. We make up numbers without any logical reason, and they are accepted without question.
These are the reasons budgeting causes such dread. Everyone knows the budget is a useless waste of time when it is prepared under the usual method. You can change this, however, by suggesting to your management that the budgeting philosophy be changed-that it can be used as a profit center rather than as a waste of time. Your company is constantly looking out for new ways to improve the bottom line. Yet few people realize that the budgeting process itself can be used as a profit center.
The usual process looks like this: weeks of discussion, filling out forms, more discussion, more forms, and, way beyond deadline, a “final” budget. Of course, that final version is changed yet again, so it’s nearly the end of the first quarter before the budget is accepted. In some companies, the budget for the new year is barely finalized when six-month revision work starts.
There is little if any follow-up on the budget. Once the budget is done, there are no meetings to discuss variances and their causes. Or maybe causes are discussed, but no one takes any steps to fix the problem. So it goes on, until the next revision deadline or year-end.
What is wrong with this description? It is not budgeting! It’s only filling out forms and passively finding and acknowledging problems. Lacking are the controls and actions that bring budgets to life, the follow-up, the investigation, and the reversal of discovered negative trends. Without these steps, the budgeting process has only gone a fraction of the way toward achieving its intended purpose.
