A More Honest Approach to Budgeting
Article Link: A More Honest Approach to Budgeting
Budgeting is one of the arduous tasks that is inevitable when acquiring a company. But, Howard Tullman gives a refreshing point of view on a normally stressful situation in this Inc. article. Tullman states that even if budgets can be calculated to the best estimate, it is impossible to determine the exact amount of money necessary to accommodate every branch of the company.
Tullman’s solution is to fence-it-and-forget-it, which can be accomplished by making an estimate of money needed for the year for specific categories in the business and adding a small cushion in case of emergency. Then, it is left to the managers and branch heads to determine how they use that money. This not only makes budgeting a one and done situation at the beginning of the year, but it also makes each branch prioritize what is most important in the upcoming year. Once the year is up, evaluations and changes can be made in order to improve in the future. Understanding the ambiguity of the future and realizing that budgets will not be exact allows companies to focus on their priorities.