Page 23 - Budgeting for Managers

Budgeting for Managers
6
A Fresh Start
Evan was the new marketing manager for a small company.
Up until now, he had always made his budgets starting from
what was actually spent in the last two years. But he discovered that
this company had done almost no marketing in the past two years
because it had three large clients and wasn’t looking for new work.
Now things have changed. Evan was hired because two of the clients
went out of business and the company now needs more marketing.
Evan sat down with the company owner and asked him what the mar-
keting goals for the company were for the next year.With the owner’s
help, he built an accurate marketing plan to meet those goals.Then,
starting with the plan instead of the prior year’s spending, he made a
budget that would allow him to allocate funds more realistically.
the first option, we review a prior year or years and then make
changes where we think the future will be different from the
past. In the second option, we look at a written plan of what we
are going to do and ask, “What will I need to buy? How much
money will I have to spend?”
Both approaches are good and you can start with either
one. However, if you don’t have accurate information about the
prior year or you know that this year is going to be very differ-
ent, then you have to work from a plan, rather than from past
results. To make a really good budget, it’s best to look at the
budget both ways.
Suppose that you have good, actual expense figures from at
least one prior year. Does that mean that it’s best to start from
them? Not necessarily. Sometimes, it’s still better to start from
your work plan for the new year. This depends a lot on how much
production work you do and how much project work you do.
When you’re creating a budget for production work, you’re
probably better off starting from last year’s budget. If you’ll be
working in much the same way, then last year’s plan is a good
start for this year’s plan. However, when you’re creating a budg-
et for a project, you’re better off starting with your project plan.
Because projects are unique, something you’ve done before is
not a good model. Build from your plan so that your budget