Page 27 - Budgeting for Managers

Budgeting for Managers
10
Keeping Budget Notes Throughout the Year
Plan ahead.Whenever you approve a major expense, make a
note of why the expense was necessary. It’s easiest to keep all
these notes in one computer file.You could put them in a word pro-
cessing document called, for example,“2003 budget notes.” Or, if you
prefer spreadsheets, you can use the feature that attaches little notes
to each cell. Either way, when you sit down to make your next budget,
you’ll know why you spent money the way you did. In a large organiza-
tion, you can review the budget monthly and ask people why large
expenses occurred and make your notes.
Step 3: Predicting the Future
Unless you have a working crystal ball, the best way to predict
the future is to picture it, meet with people about what they
want and what’s happening, and then make an estimated or
calculated guess. Your guess will be the best one possible
because it’s based on good information, your own experience,
careful thinking, and accurate calculations.
New managers are often afraid of writing down a lot of
guesses and giving them to their boss. That’s understandable.
But that’s all anybody ever does when predicting the future.
Reasonable and calculated guesses are the best we can do for
budgeting. Even Alan Greenspan, when talking about when the
economy will improve, is just making an estimated and calcu-
lated guess, based on his team’s research and experience. It
won’t be comfortable at first. But, if you follow the steps careful-
ly and thoughtfully, you’ll be surprised how often you’ll be right
or close, as long as you understand how your office works.
Let’s look at some sample line items and see what it’s like
to predict the future. In examining the lease contracts, you real-
ize that two of the machines have been on lease for only two
years and you’ll pay another $1,200 on each of them this next
year. But the third machine is now five years old and has a pur-
chase option. For $350, it’s yours. Since it works fine, you
decide to buy it. You can now predict lease expenses for 2003:
two machines at $1,200 each for $2,400. And you add $350 to