Why a Good Budget Is Essential

A budget is an essential piece to building a strong financial backbone to any company. While they are useful in specific planning endeavors as with allocating resources, preventing financial bottlenecks, and coordinating activities between departments, budgets are perhaps more important in their ability to make concrete the more abstract goals of the organization (Noreen, et al, 2017). Most companies have mission and vision statements, and many have strategies aimed at achieving those goals. But without a tactical plan, the strategies cannot be successful. A budget is a crucial piece of the tactical plan.

A personal example can help to illustrate. In 2013, I had just started at my first consulting firm when I drafted a proposal for a new initiative. The idea was well received by all to whom I presented it. My peers had all urged me to propose, my superior advocated for it and presented it to her boss, who then took it to Human Resources, who then took it to the executive vice president of the company. We had mobilized working teams to handle operations, marketing, and events, and we had gathered a list of more than a hundred interested volunteers. The initiative was creating a substantial amount of positive discussion throughout the enterprise.

But the initiative was stagnant because we had not finalized the budget. The team could not enact their ideas because they lacked funding, and our sponsors could not devote resources because the initiative did not show up in their budgets. Our budget was infinitesimal compared to the overall budget, and yet we could not proceed without it. Once the executive vice president authorized our budget, everything fell into place. The sponsors devoted resources and our team went into action. The budget was the necessary lever to make everything else function properly.

References

Noreen, E., Brewer, P., Garrison, R. (2017). Managerial accounting for managers. Retrieved from McGraw Hill Connect