Nearly every organization, whether it be public, non – profit, or related to a for – profit group or scenario, has some sort of budget process. Unfortunately, far too often, the attitude towards the significance and relevance of the budget process is often a diminishment of the need for this process. Meaningful budgeting must always begin with an attitude of understanding and appreciating the reasons and needs for the process. When done correctly, it enhances one’s ability to do a thorough and relevant analysis of needs and priorities, as well as direct a process in the right direction. This should assist in the prioritization process, and make this a step towards functionality, rather than merely an exercise. Once this is understood, many believe that only by using a zero – based budget process, does the document serve the maximum purpose.
1. The vast majority of individuals tend to feel that creating a budget is merely a guide, rather than a directive. Because of this, once they get the budget approved, they often ignore the document, and merely resort to shorter term or crisis management form of leadership. On the other hand, when budgets are used properly, they set the tone, create priorities and direction, and do so in a responsible and effective manner.
2. Effective budgets begin with a commitment to thorough analysis. This permits groups to set goals, create meaningful prioritizes (based both on needs as well as goals and visions), and to effectively plan for the upcoming period. When use properly, budgets are an essential first step in realistic strategic planning.
3. Does your group have needs and priorities, and do they plan to address these in a manner that includes budgeting for them, or do they simply take haphazard steps in a less than meaningful manner?
4. Budgets must be used as a guide to which actions to take, and how to get the maximum bang for the buck. When this is done, organizations have the ability to prioritize providing value to their constituents and other stakeholders.
5. For more than three decades, I have prepared and assisted in preparing numerous budgets, and have become an advocate for the need for using zero – based process. Zero – based means avoiding the tendency of merely extending meaningless budgets year after year. When groups merely look at what they are doing, and just either maintain a line item expenditure or increase things by a specific percentage, groups lose an opportunity to improve and become more efficient and effective. Zero – based means one must justify each non contractural item on a needs, priorities, best ways, and relevant manner. Only when this is done can most organizations plan effectively in a non – crisis manner, and evolve before they must.
Don’t consider budgeting to be merely a process or exercise! When that is the approach and attitude, opportunities are squandered, monies and time wasted, and true leadership dinminished. Commit to use your budget as your ally.