Budgetingby John Kind
Having prepared your forecast for the current financial period, the next task is to specify the budget priorities for your business, department, organisation or team for the following year.
The next year’s budget should have clear links with your organisation’s longer-term strategic plan. You need to indicate, as specifically as possible, the steps you will take next year to help the organisation achieve these longer-term objectives.
Your task is to engage with your more senior colleagues so that you become conversant with the ways in which external issues are likely to have a specific impact on your budget for next year. For example:
- Will any changes in legislation, such as rules concerning maternity and paternity leave, affect your department or team? Will changes result in a need to recruit temporary staff to fill any short-term vacancies?
- What is the outlook for inflation, especially with regard to those costs that will affect your budget? As a team leader in the IT Department, you are aware that salary and system development costs make up 85 per cent of your total costs, so the impact of inflation on these expenses needs to be assessed.
You should now pinpoint the major internal issues that need to be addressed in the next year’s budget, matters which will help the organisation to achieve the longer-term objectives in the strategic plan. You will need to focus on those affecting your budget.
- The plan may include the intention to launch a number of new products and services and to move into new markets overseas. What should be included in next year’s budget to support the achievement of that objective? The setting up of offices in a number of new locations? The recruitment of new, local staff? Establishing a joint venture with a local manufacturer? Raising additional loans to finance the new operation?
- The plan may include a project to upgrade the financial and HR capabilities of your IT system. If so, what will be the implications for your section or team? The negotiation of a new contract with an existing or new supplier? Extra systems development costs? More office space?
- One or two of your team members will be retiring. What needs to be done to recruit their successors?
- Staff turnover in your team has been higher than anticipated. What steps will you take during the next budget period to reduce this? Additional staff training? A mid-year salary review? The introduction of a more professional performance management system?