Page 133 - Budgeting for Managers

Budgeting for Managers
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good guess about the future. As a result, you may want to pres-
ent a range of estimates, rather than exact figures. Here are
some things to consider:
• When there are two ways to present ranges, one is to
present a low figure and a high figure; the other is to
present a single figure, plus or minus a certain percent-
age. For example, you can say that an item will range
from a low of $9,500 to a high of $10,500 or will be
$10,000 plus or minus 5%.
• If figures are the result of doing exactly what you did in
the prior year or the result of committed contracts such
as leases or purchasing contracts, then exact figures are
more suitable than ranges.
• If some figures are exact and some are rough estimates,
you can present a budget in two columns, with a mini-
mum estimate in one column and a maximum estimate
in another column. If the figure is exact for a given line
item, then the same number appears in both columns.
•You can also present a budget in two columns if you have
alternate plans. You can present a budget for each plan,
so that the people at the meeting can compare the two
plans.
As an example of presenting alternate plans, let’s take a
look at a bidding spreadsheet prepared by Jose, the computer
consultant who prepared a bid for the new inventory system
and gave it to Robert. You will see the low and high bid propos-
als in Table 7-5.
Jose accompanied this budget with an explanation of the
difference between the two systems. The less expensive sys-
tem would stand alone and not link into the corporate net-
work. It would work just fine, but only send reports to the
main office. It couldn’t be updated from the main office. The
higher bid is the price for a system that would link into the
main office, with an extra software module to make the link
and some extra customization that increased design, develop-