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Budgeting Procedure

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A budgeting procedure is a critical document, for it sets the timing of a series of interlocking steps that a company must complete before it can complete an approved annual budget in time to be of use for the next fiscal year. The primary budget steps are:

Determine Corporate Strategy (President)

1. Call a meeting of the management team to review and revise the preceding year's strategy statement.
2. Distribute the current strategy statement prior to the meeting.
3. Revise the statement as necessary, following the meeting.

Issue Revenue Budget Materials (Budget Analyst)

1. Fill out a historical report for the sales manager, showing revenues by product and region, month by month, for the current year to date.
2. Review and adjust the revenue budget completion instructions.
3. Schedule a meeting with the sales manager to deliver these materials and answer any questions regarding how to fill out the revenue budget.

Issue Expense Budget Materials (Budget Analyst)

1. Fill out a historical report for each department manager, showing expenses, month by month, for the current year to date.
2. Fill out the budget form for each department manager, with estimated expenses for lesser expense items, current salaries, and estimated pay raises. Leave blank all revenue accounts and larger expense line items.
3. Review and adjust the budget completion instructions.
4. Issue this material to each department manager, and schedule a meeting to answer any questions they may have regarding how to fill out their portion of the budget.

Compile Initial Budget Iteration (Budget Analyst)

1. When received, manually reenter each budget form into the budget model.
2. Send a copy of the completed departmental model to each department manager for review.

Complete Subsequent Budget Iterations (Budget Analyst)

1. Schedule a budget review meeting for senior management.
2. Distribute a copy of the preliminary budget to the senior management team prior to the meeting, along with analysis notes regarding comparisons to historical results, key ratios, step costing change points, and impacts on bottleneck operations.
3. Summarize the senior management team's instructions from the meeting and distribute to the department managers for the next budget iteration.
4. Repeat as necessary.
5. When the budget iterations are complete, manually recalculate the budget model.

Approve the Budget (Budget Analyst)

1. When ready for approval, print a copy of the budget on which the footer on every page states the date and time of approval, and the words FINAL VERSION.
2. The CEO signs a copy of the budget to indicate approval of the final version.
3. Password protect the approved electronic version of the budget and archive it.

Load the Approved Budget (Budget Analyst)

1. Enter all line items from the budget into the accounting system.
2. Have a second person review the loaded budget and tie all numbers back to the approved final version.
3. Password protect access to the loaded budget.

Other Steps

If the company employs a flexible budget that changes in relation to actual revenue levels experienced, add these steps:

1. Following the completion of each monthly close, but before issuing financial statements, enter the actual monthly revenue in the flexible budget model.
2. Transfer the flexible expense line items into the accounting system for the current month.
3. Print the budget versus actual financial statements and distribute them to everyone on the distribution list.

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