Page 143 - Budgeting for Managers

Budgeting for Managers
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In some companies, particular negotiation methods are part
of the corporate culture or even part of the formal training for
managers. Get any training and advice that you can so that
you’re prepared to present and defend your budget. For exam-
ple, some companies assume that all departmental budgets are
padded and automatically cut all of them by 10%. If you are
new to management, you probably won’t be able to change the
system, so you’ll have to go along with it. There are two differ-
ent approaches to this, which we discuss later in “Block and
Line Item Allocation.”
Adjusting to the Authorized Amount
Senior management will approve your budget with or without
adjustments.
If there are no adjustments, then you’ve got all of the money
that you asked for. Your next step is to go to the accounting
department with the approved budget. They’ll enter it into the
computer system and set up your accounts with the proper
account codes and the amount you have authorized for each
line item. We’ll discuss this in detail below, under “Setting up
Your Budget with Accounting.”
If the budget has been adjusted, you have several choices:
•You can change your work plan or your project plan to
fit the adjustments.
•You can look for alternative sources of money.
•You can request a meeting for reconsideration.
If you change your work plan, it’s best not to cut each item
by a certain percentage and just try to make things work.
Some items, such as salary and purchases by contract, are
fixed costs that you can’t change. Instead, you should plan to
reduce variable costs that are under your control. There are
two ways to do this:
• Make a large cut in cost areas under your direct control
to balance the whole budget.