Writing a Budget

The preparation of budgets requires the collection of data. This data will be used to justify the projected expenditure. Consequently it must be presented in a manageable way in order that your case receives the attention it deserves.

It is a good idea to follow the format of a report or business plan, presenting first a summary and then backing it up with the hard facts, subjective information and forecasts that formed your final proposal.

Making the information easy to read and accessible increases your chances of success. People will not go to great lengths to attempt to unravel a complicated or unwieldy document.

The various departmental budgets should all be pulled together to produce a master budget. This would include a budgeted (projected) balance sheet and a budgeted profit and loss account, from which useful ratios (eg the current ratio) could be produced.

It is a good idea to prepare a budget file or manual, containing all of the budgetary figures. This information should be easily accessible to all relevant people within the organisation, giving them the big picture rather than the more restricted view they would otherwise have if they had access only to their own figures.

Monitoring

It is important that progress is monitored regularly to see if the budget is being adhered to. Effective monitoring depends on prompt information. Month-end figures must be produced without delay, certainly within one to two weeks. Reforecasting (redrawing the budget in the light of experience and new information) should be conducted at least quarterly, if not monthly.