How Is the Budgeting Process Integrated and Communicated to Achieve Strategic Objectives?

Effective company leaders institute a rigorous budgeting process that ensures all departments align their programs to achieve the company's strategic objectives. Part of the process involves communicating regularly with all the responsible designates so that the resulting company budget reflects a cohesive plan for the coming year. Regular status meetings, prompt distribution of the most up-to-date data and stringent reviews produce the most accurate financial statements. An integrated budget process culminates in the right levels of authority approving expenditures and investments.

Establishing a Schedule

  1. Setting up a schedule for the budgeting process ensures that checkpoints throughout the process get met. This assists the staff in making sure work gets planned in a timely manner and specifies how long personnel have to gather information and make decisions. The length of time depends on the complexity of the organization. Usually, the budget process begins in the final quarter of the previous fiscal year.

Identifying People from Each Department to Participate

  1. The first step of the planning process typically involves identifying who coordinates the final budget and which personnel contribute their organization's details. By defining the required input, document formats, risks and dependencies early in the process, the coordinator ensures all contributors recognize the requirements and commit to meeting the deadlines.

Establishing Roles and Responsibilities

  1. The next part of the process involves communicating the roles and responsibilities. Templates and forms must be accessible to everyone. If people need training on how to complete the required forms, the coordinator provides workshops, seminars or self-paced training at the beginning of the process to prevent delays in completion later on.

Ensuring a Return on Investment

  1. To achieve a company's strategic goals, all funded work must align to support those efforts. Successful leaders establish goals that are specific, measurable, attainable, realistic and time constrained (SMART). Each use of the company's money must demonstrate a return on investment or the effort is wasted. A department divides up its budget depending on its ability to support these goals with relevant activities. Together, the departments agree upon the formulas used for calculating key entries, often relying on industry standards. For example, the Society for Human Resource Management provides calculators for determining the "average cost of benefits per employee" and other metrics.

Validating Assumptions

  1. Each department must conduct research to validate current pricing with suppliers, business partners and customers. Forecasts can be neither too pessimistic nor too optimistic to be useful. Each budget should list details by activity in categories, such as design, operations, marketing, training, research, production or support. When a company clearly defines and communicates its mission and strategic goals, each department can align its work to achieving the objectives and determine what financial resources it needs. By involving all departments in the budgeting process, company leaders improve the accuracy of budget data. Once each department submits its budget, it must be approved by the appropriate levels of management. Because of the continuous collaboration throughout the process, typically, no surprises occur at the end.