Modern businesses cannot afford to leave their performance to fate. A key management tool in determining and evaluating business goals is effective budgeting; permitting the planning, control and monitoring of financial assets.
Flatter and more devolved organisational structures also mean that responsibility for fiscal matters extend beyond the control of the finance director and finance department. Organisations can no longer afford to carry managers who are financially green. Having a thorough awareness of the processes involved in budgeting will help you present a convincing case for that vital conference trip or specific project and, more importantly, contribute to the effective running of your department.
As Jean Pousson, consultant tutor to the Institute of Directors, who has lectured and consulted for 13 years on finance, strategy and banking issues, points out: "Budget-setting is essential as financial stewardship needs to be maintained at all levels within an organisation. Every decision in business has a financial impact and managers ignore this at their peril. The failure of boo.com highlighted this two years ago. The founders admitted, had they had proper financial discipline, the business might not have failed."
It may also be that you are considering setting up an HR consultancy or a move into interim management, where budget setting will prove a necessary part of running your business effectively.
Where do I start?
A budget translates the organisation's mission and strategic course into an economic blueprint for action. So the first step is to identify these aims and targets, as they will shape preparation of your budget. An increase in manufacturing output, outsourcing of the function or consolidation will all have an impact on expenditure on key HR activities such as recruitment, training and development, or redundancy provision and should influence your calculations.
Detail your anticipated costs under any relevant headings or in a matrix along with summary explanations of how they were reached. This may help recall at a later date and if a report has to be presented for approval. Use the language of finance and recognised budgeting procedures (see below). It is essential to relate expenditure on a specific project, function or service with the benefits it will deliver to the organisation. Prioritise the most important of them to ensure they,