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                                      Finance for Non-Financial Managers
                               4
                                          Budget  A projection of
                                                                   who is asked to prepare a
                                          the detailed income and
                                                                   budget for his or her
                                          expenses that we estimate  Consider the new manager
                                will occur in a future period, usually  department.
                                prepared on a month-to-month basis     How do you begin your
                                for up to a year. Each kind of income  budget? Well, how about
                                and expense is listed, along with the  sales? Do you start with
                                amount each line is expected to add  what you hope you can
                                to or subtract from the profit for the
                                period.                            sell? What you’re sure you
                                                                   can sell? What you sold
                                                                   last year or last month?
                               What will management believe?
                                   OK, if that’s too confusing, maybe you should start with
                               expenses. What do you need to spend? What you spent last
                               year or last month? What you hope you can get approval to
                               spend? Do you actually know what it will really cost?
                                   Just knowing where to begin is a challenge. And then how
                               do you decide how much money or staffing you’ll need to reach
                               the goals you want to achieve or that your boss wants you to
                               achieve?
                                   Whew! Why can’t Finance just do this for you?
                                   And the truth is, of course, they really can’t. Oh, sure,
                               Finance can prepare something that looks like a budget and in
                               many companies that’s what happens. But then it’s not really
                               your budget; it’s theirs. And if you miss the target they set, well,
                               it’s not really your problem, now, is it? Yet as managers we
                               know that each department knows its unique needs and capa-
                               bilities better than anyone else. And we know from Management
                               101 that a goal must be accepted—better yet, owned—by the
                               people who actually will do the work, for there to be a strong
                               commitment to achieving it. And that, simply put, is why each
                               department within the organization must do its own budget and,
                               therefore, why its managers must learn to budget effectively.
                               And, yes, you will need to be able to answer, at some level, all
                               the questions I’ve raised above. Happily, Chapter 10 in this
                               book will help you do that.
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