May 09
1
Finding Your Assumption Base -2
This is next series from previous posting in assumption. Most expenses are controllable in one way or another. Telephone expenses can be controlled with policies regarding personal use. Office supply levels can be kept down with a centralized purchasing requisition system, locking up supply inventories, or demonstrated safeguards meant to curtail minor pilferage. Insurance expense levels are predictable based on anniversary dates of policies in force, plus known future requirements for additional coverage. In short, there are very few expenses that cannot be scientifically predicted, and for which a fair assumption base does not exist.
Developing appropriate assumptions might sound like a very time-consuming effort. You do need to create a documentation file for each and every category of expense in your department, develop the assumption, and then carry the result over to a worksheet. But this will not take any more time than doing your budget in the traditional manner. In fact, proper assumption-based budgeting will save time in the long run, for the reasons listed below:
• Properly documented budgets reduce your task next year. One of the greatest complaints about budgeting is that the process is long and tedious. It comes at the end of the year, often demanding overtime for everyone, and it drains your energy at a time when you’re also trying to finish up other departmental matters. While assumption-based documentation might seem like just more paper¬work, it is a form of departmental planning and organization. Thus, it saves time, cuts down on duplication of effort, and makes the entire task much easier-rather than harder.
