Finding Your Assumption Base -4
• Budget revisions, if required, are more easily justified and executed. It might seem that, just as you complete the current year’s budget, worksheets archive for the six-month revision. While the policy of midyear revisions should be questioned most critically, many organizations continue to waste time developing detailed budgets that will never be put to good use. Without assumptions for each account, revisions may require as much work as the original budget. No one likes revisions because, like original budgets, there is never a “good” time to do them. But you can make revisions much more quickly by going through your original assumptions, modify ing them based on what the first six months have revealed, and recommending one of two changes in response: Either tighten controls on spending, or revise the budget for items overlooked in the original version.
• Once you establish the appropriate assumption base for each account, new budgets can be prepared very quickly. Perhaps the one reason budgets demand so much analysis time is that we don’t learn from past successes or failures. The past year’s budget should not be abandoned automatically, but it usually is. Once the year is ended, how often do you look back at last year’s worksheets?
If you have used assumption-based documentation to build the current year’s budget, the actual outcome-in comparison to your estimation work-is a very revealing document. You can improve your budgeting technique, your accuracy rate, and your sense of timing, by referring to the previous budget while preparing a new one.
