Page 69 - Budgeting for Managers

Budgeting for Managers
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When you have the best figures you can get and when you
know how good you think they are, you’re ready to start work-
ing on this year’s estimate. However, don’t assume that the
future will be like the past. Ask yourself how the department
has changed from last year to this year. Here are some impor-
tant questions:
• Does the department have the same customers?
• Is it doing the same work it did in other years and offer-
ing the same products and services?
• What external changes, such as good or bad years in
the economy or your industry, will have an effect?
• Has the department changed the way it does business?
Is staff reorganized? Is the number of people the same?
•Are there vacancies you will fill this year?
• Do you expect to hire new people?
• Have you made any recent efforts to reduce costs or
increase sales that might make a difference in the
upcoming months or year?

Working with Multiple Periods and Trends
The more information we have about the past, the better we can
estimate the future budget for our department. But we have to
know how to use that information in a smart way.
Comparing Line Items
Look at all the prior periods. Do they have the same line items?
If not, when new ones were added, might the new line items
have been created by splitting prior period categories? For
example, if we see that the most recent year has two lines,
“office equipment” and “office supplies,” but the preceding year
has “general office” and all the other lines are the same, it’s a
pretty good guess that the two new lines were split from “gener-
al office.” If you suspect that the categories are different from
period to period, do not use those line items for trend analysis.