Page 61 - Budgeting for Managers

Closing the Gap
We may run into two gaps when we gather past figures.
First, some figures may be missing. Second, two sources may
disagree. Maybe accounting says we spent a certain amount on sup-
44 Budgeting for Managers
plies and our records show a different number. When we find these
gaps, we should try to understand the reasons. If we can get detailed
line items to compare, that makes it much easier because we can drill
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down and find the differences.
When numbers are simply missing, we may be able to do some cal-
culations. We might have a total figure for the budget (possibly on the
corporate financial statement or tax returns), so we can subtract the
figures we do have for some categories and what remains is the
amount of money spent on the unknown categories.

Once we have our past figures, we should lay them out in a
spreadsheet and create a new column (or columns) for our new
estimates, as we did in Chapter 1.
Using Estimated Figures
If we can’t find actual figures, and even if we can, it’s good to
have the estimates for the prior months or years. If we don’t
have past actual figures, then this is likely to be the best we can
get. And if we do have past actual figures, then the estimates
can still be useful in two ways.
First, we can set up a very convenient spreadsheet that
shows past estimated figures and past actual figures, then add a
new column for our estimates for the next period.
Second, we may find that there are budgetary assumptions
that we or the previous manager wrote. We can use those
assumptions or adjust them based on what we’ve learned since
they were made. Sometimes, the budgetary assumptions may
tell us where to find the missing actual figures.
If all we have are estimates, then we should think about set-
ting them aside and starting from scratch. Remember, we have
no way of knowing if the estimates reflect what was actually
earned or spent in the past period.

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