Steps to developing and managing a budget every

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Steps to Developing and Managing a Budget Every organization, no matter the size should know why it exists and what it hopes to accomplish. This is articulated through a written Vision and Mission Statement. A Strategic Plan is the HOW the organization plans to achieve its mission. Annual business goals are the steps an organization takes to implement its strategic plan and it is these goals that need to be funded by the budget. Step 1 Strategi c Plan Step 2 Busines s Goals
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Steps to Developing and Managing a Budget Revenue projections should be based on historical financial performance, as well as projected growth income. The projected growth may be tied to organizational goals and planned initiatives that will initiate business growth. Projecting fixed costs is simply a matter of looking at the monthly predictable costs that do not change. Employee compensation costs, facility expenses, utility costs, mortgage or rent payments, insurance costs, etc. Step 3 Revenue Projecti on Step 4 Fixed Cost Projecti on
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Steps to Developing and Managing a Budget Variable costs are costs that fluctuate from month to month, supply costs, overtime costs, etc. These are expenses that can and should be budgeted and controlled. Goal related projects should also be given budgets. Projections of costs should be identified, laid out and incorporated into the departmental budget that is responsible for completing the goal Step 5 Variable Cost Projecti on Step 6 Annual Goal Expense s
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Steps to Developing and Managing a Budget Profit margins allow for returns for the business owner or investors. Profits are important for all organizations and healthy profit margins are a strong indicator of the strength of an organization. The governing board, president, owner or head of the organization should approve the budget and keep current with budget performance. To monitor budget performance, To be familiar with all expenditures, To safeguard the organization against misappropriation of funds or employee fraud Step 7 Target Profit Margin Step 8 Board Approv al
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Steps to Developing and Managing a Budget A budget review committee should meet on a monthly basis to monitor performance against goals. This committee should review budget variances and assess issues associated with budget overages. Budget variances should be reviewed with the responsible department manager and questions should be raised as to what caused the variance. Step 9 Budget Review Step 10 Dealing With Budget Variance s
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Budgets and the Organization Provide an opportunity to reevaluate existing activities and evaluate new ones Aid managers in communicating objectives and coordinating actions across the organization. Provide benchmarks to evaluate subsequent performance. Compel managers to think ahead A D V A N T A G E S
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Budgets and the Organization Formalisation of Planning Forces Managers to devote time to planning Budget prepares for the changing conditions It requires to set objectives and establish policies to aid their achievement Objectives are destination points and budgets are the road maps guiding us to those destinations.
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Budgets and the Organization Communication and Coordination Facilitates two way communication about
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