Page 174 - Finance for Non-Financial Managers

Siciliano10.qxd 2/10/2003 3:07 PM Page 155
10

The Annual

Budget: Financing

Your Plans

nce management has decided on a business plan that sets
Ocompany goals for the next year, the managers need to
find out (a) if they can afford to achieve those goals and (b) if
the plan will make a profit for the company. Those questions
are best answered by converting the operating plan’s goals and
actions into dollars and cents, and then breaking them down
into chunks that can be evaluated and managed during daily
operations. That’s the purpose of the annual budget. The budget
is the estimate of the financial resources that will be needed and
the financial outcome of all the actions the managers will take
during the budget period. It’s also the financial benchmark, the
report card against which their success in managing their finan-
cial resources will be measured.
The format of a typical annual budget includes a detailed,
department-by-department, line-by-line estimate of the income
and expenses that will occur if the operating plan is carried out
as intended. It contains details sufficient to enable department
managers to allocate and manage the resources allocated to

155
Copyright 2003 by The McGraw-Hill Companies, Inc. Click Here for Terms of Use.