Page 24 - Budgeting for Managers

Budgeting: Why and How
Actual Not Estimated
If you’re building your budget from a past year’s budget,
make sure that you base it on actual spending, not estimates.
Check with accounting to make sure that the figures from last year
are accurate and that nothing was left out.Also, think about whether 7
there should be any new categories or line items in this year’s budget,
then add them, rather than trying to squeeze your new budget into an
old plan.You’ll probably change the amounts of each line item—that’s
what estimating is all about—but you’ll also want to add or change the
names of line items if you have a good reason to do so.
describes what you actual-
ly need to buy, hire, or Production work Any
acquire to succeed on the work done in much the
project. Your budget may same way over and over
again. Running an assembly line and
be broken into different
processing insurance claims forms are
parts and each part can be
good examples of production work.
done either way—based on
Project A temporary endeavor
the past or on the plan. In
undertaken to create a unique prod-
this chapter we’ll discuss uct or service. In a project, you are
the basics of creating a doing work just once, not repeating
budget from last year’s it. Building a new assembly line or
budget. Creating a project installing a new computer system to
plan and budget is covered handle insurance claims forms are
in Chapter 5. good examples of projects.
Creating a New Budget from an Old One: Step by Step
In this section, we will create a simple expense budget for this
year from a prior year. Later in the book, you will learn to budg-
et income and other elements and to work with several years of
information at once. All of the ideas presented briefly here will
be explained again with a lot more detail in later chapters.

Step 1: Gathering Information
The first job is to gather accurate information about the past.
This is not always easy. Sometimes, records are not kept well.
Often, we need to project next year’s budget before this year is