Financial Budgeting: Your Operating Budget

07/28/2016 05:54 to watch
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Developing a useful operating budget is extremely valuable, and extremely challenging. Learn the keys to building an operating budget and using it to track what is going well, and head off the things that aren’t.

Suggested Readings

Founders School || The Art of Startup Finance || Financial Budgeting: Your Operating Budget || Impact Guide (PDF).

Berman, Karen and Joe Knight. 2008. Financial Intelligence for Entrepreneurs: What You Really Need to Know About the Numbers. Harvard Business Press.

Questions for You

What are the key drivers of my operations over the coming 12 months?

How can I get a better handle on each of these drivers so that I can predict them more accurately?

What flexibility do I have to adjust if we miss our budget?

Is our current budget so out of date that we should revise it?

How do our budget assumptions compare with other similar companies?

Questions for Your Team

What parts of the budget are most at risk?

What trade-offs should we make to stay on track?

Is our current budget out of date? Should we revise it?

Tools and Exercises

Put together a three step budget process with your team:

  • Step 1: Agree on your strategic and financial goals and priorities for the next 12 months.
  • Step 2: Have each senior manager put together a budget for his or her group, based on these goals and the company’s resources, constraints, and prior experience. Encourage creative solutions to get more accomplished with fewer resources.
  • Step 3: Come together as a team and reconcile group budgets with overall company goals. Encourage creative approaches to reorganizing programs and resources to get more accomplished. You will find that you have to adjust some of your goals and methods as well as adjusting some of your group budgets.

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