Foreword
The idea of budgeting often brings fear, even loathing, to the minds of most persons. Perhaps that is because many of us were first introduced to the term by trying to figure out how to spend our seemingly unfairly small “allowances” as children. It was not easy to figure out how much candy we could buy and still go to the movies on the weekend. These days our children buy more movies (and video games) than they attend, but the principles (and the sweets) are the same.
In its simplest sense, budgeting is any plan, usually expressed in financial or mathematical terms. As an expression of expectations, a budget generally aligns resources with needs to accomplish a specific goal. As mileposts and measuring sticks, budgets provide invaluable benchmarks that can be used every day in reacting to management challenges.
Some see budgets as a necessary evil, but in reality they are underrated tools that can greatly enhance any business process.
The greatest value of budgets—arming management with key decision-making tools—is often overlooked. To the uninitiated, a budget succeeds or fails based on how close actual results compare to expectations. While it is great fun to predict the future accurately, to win a bet as they say, life’s best lessons are often learned in analyzing why you were wrong.
In reality, analyzing the reasons actual results differ from expected results is a far more useful tool than the often disappointing attempt to accurately predict the future. This cannot ...
