Budgeting

Budgeting: A comprehensive guide

Budgeting is an indispensable tool in the financial management of a company. It makes it possible to plan and control financial resources and resources efficiently. In this lexicon entry, you will learn more about the basics, benefits, challenges, and the various methods and tools of budgeting.

What does budgeting mean?

Budgeting is a process of setting financial goals and objectives for a specific period of time. These goals are based on financial planning that takes both internal and external factors into account. The results of this planning are translated into budgets, which then serve as a basis for strategic decisions.

Financial planning and budget preparation

Financial planning forms the basis for budgeting and includes forecasts of future income and expenditure. These forecasts take into account market conditions and internal corporate factors.

Partial budgets and goals

Budgets are usually divided into various sub-budgets that cover specific areas of the company. These sub-budgets help to precisely define financial goals and allocate resources accordingly.

Budgeting challenges

Although budgeting offers numerous benefits, there are also challenges to consider. The uncertainty and effort involved in budget preparation can affect efficiency.

Uncertainty and risks

Forecasts are always associated with uncertainty, particularly in volatile markets. Unforeseen events can significantly affect planned budgets.

Expense and misincentives

Budget preparation can be time-consuming and resource-intensive. In addition, focusing too much on budget requirements can create false incentives that jeopardize corporate goals.

Budgeting methods

There are various methods of budgeting that can be used depending on company size and goals:

• Traditional budgeting: This method is based on the actual values of the previous year and adjusts budgets by a specific percentage. It offers a simple but less flexible solution.
• Zero-based budgeting and flexible budgeting: Zero-based budgeting plans all spending from scratch, without reference to previous year figures. Flexible budgeting continuously adapts budgets to changing conditions.
• Rolling budgeting: During rolling budgeting, budgets are regularly updated to always take current data and requirements into account. This method provides flexibility and adaptability.

Tools and software

Numerous tools and software solutions are available to support budgeting:

Tool Description Spreadsheet Basic functions for budget creation and analysis (e.g. Excel) Budgeting software Advanced features such as scenario analysis and reporting (e.g. Adaptive Insights) Business Intelligence (BI) Tools Visualization and analysis of financial data (e.g. Tableau, Power BI)

spreadsheet programs

Programs such as Microsoft Excel or Google Sheets offer basic functions for creating and analyzing budgets. They are easy to use and widely used.

Specialized budgeting software

Special software solutions offer advanced functions for planning and controlling budgets. They are particularly useful for larger companies that have more complex requirements.

conclusion

Budgeting is an essential tool in financial management that helps companies achieve their financial goals and use resources efficiently. Despite challenges such as uncertainties and effort, careful planning and the use of appropriate tools can make budgeting a successful tool.