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Budget stages

The stages of the budget process are:

1 Have objectives.

2 Arrange strategy and tactics.

3 Prepare the detailed plan - the budget.

4 Implement the budget.

5 Monitor the budget and actual figures - take action.

6 Feedback/review objectives.

Each stage of the budget process is defined below.

1 Have objectives

Overall objectives will come from the corporate plan or equivalent, which assumes the question 'Why be in business?' has been answered. There must be much consideration of budget objectives and the strategy and tactics required to achieve them during the detailed work required in assembling and determining the corporate plan.

2 Arrange strategy and tactics

The word 'strategy' is used here in the mundane sense of considering the actions to be taken, the order in which they are undertaken and the facilities required to achieve the budget objectives. The arranging of day-to-day strategy and tactics required to deliver the strategy must be considered during preparation of the detailed corporate plan and regularly reviewed.

3 Prepare the detailed plan - the budget

This is the stage where the budget is prepared - the figures are assembled to indicate the outcome and to monitor the business's activities over the following periods.

4 Implement the budget

Implementation will mean different things to different organizations, from sending of a brief memo or holding a formal budget implementation meeting through to entering into a budget 'contract' with staff. Budget implementation is often a weak area in that there is really no implementation - the budget process will just happen.

5 Monitor the budget and actual figures - take action

Budgets exist to help the business achieve its objectives. Any deviation from budget indicates that there may be problems and thus action should be taken to bring the business back into the desired operational position.

6 Feedback/review objectives

A business should not change its course or overall objectives just because the budget is not being achieved. However, if there is consistent deviation from the budget, there is reason to question the budget and the underlying objectives of the business function in operation.

 
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