How People Impact the Budgeting Process - dummies

How People Impact the Budgeting Process

By Kenneth Boyd, Lita Epstein, Mark P. Holtzman, Frimette Kass-Shraibman, Maire Loughran, Vijay S. Sampath, John A. Tracy, Tage C. Tracy, Jill Gilbert Welytok

The budgeting process isn’t only about numbers; it also involves people. A budget is something that a group of people typically reviews and eventually comes to an agreement on. Involve people, consider their opinions, and get their buy-in on the budget. If the company’s managers don’t generally agree on where you’re headed in your budget, you may need to revise it.

Talk to your staff. If you’re concerned about wasting material in the manufacturing process, talk to people on the factory floor. Maybe you’ll find out that poor quality is the reason some material is wasted during production.

Maybe some denim you use to make jeans tears too easily, and you need to find a new supplier. You may never find out about that if you don’t spend some time on the factory floor.

Talk with the sales staff to plan sales for the year. Good salespeople know their clients. They may know about a client’s purchasing plans for next year. They may even know a client’s budget to buy your product! Also, a good salesperson knows the customer’s financial condition. If the customer’s business is growing, he or she may buy more from you. If the business is in financial trouble, sales may decline.

Have a conversation with the accountant during planning. She knows how cash flow turned out last year. You can look at the data on how quickly you collected cash for sales. Also, your attorney may remind you of any legal issues that could possibly generate expenses during the year.

There may be costs for legal services or costs to settle litigation. Those costs require cash, and you need to include them in your plan.

When your budget is in good shape, present it to your staff and explain where the company is headed. They’ll feel more confident knowing the company’s direction and prospects, especially if they played a role in developing the budget.