If you are basing them on last year and last year was

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Unformatted text preview: s called ‘blank-page’ budgeting. This is usually considered to be the best approach by budget professionals because it allows you to start from scratch and use your identified objectives and priorities as the basis for the budget you create. In this scenario, you look at the coming the year’s objectives and then you examine what you will need in your budget in order to achieve those objectives. No matter what method you choose, you will probably have to propose your budget to management in order to get approval. It is a good idea to give management a few options. So you should create a minimum budget, a target budget, and a stretch budget. 8.2.1 Minimum Budget This is the bare essentials, rock-bottom amount that you can see being required to achieve the lowest level of your objectives. It’s important that you truly define what you will be able to do with this budget, and more importantly, what you will NOT be able to do. This makes it clear to management what level of risk they are taking if they only agree to fund your budget at the minimum level. 8.2.2 Target Budget This is the level of a budget that you feel is the bare minimum in order to fully support the established objectives for the coming year. You are saying with this budget that you can commit to helping achieve the stated objectives as long as you have this amount of funding. Again, you need to clearly delineate what you would be able to provide at this level. Make it realistic, achievable, and as accurate as possible because if you get the full target budget, you will be held to what you have promised. 8.2.3 Stretch Budget In this funding scenario, you are itemizing what additional level of objectives you can meet if you have this higher level of budget. Don’t be surprised if you do not receive this level of budgeting – it’s entirely possible that the rest of the organization simply couldn’t handle a higher level of performance than what the stated objectives will provide. For example, if you stated that you could increase sales by 10% with your stretch budget, that would mean that everyone involved in supporting the sales tea...
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This note was uploaded on 06/07/2013 for the course BA 201 taught by Professor Cuongvu during the Fall '13 term at RMIT Vietnam.

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