Instructions for managing a budgeting process

While large companies usually have a budgeting process, this is much less common in VSEs and SMEs, which often consider it complex or even tedious. However, even small organisations can set up a budgeting process, provided that the implementation steps are strictly followed. It is a management tool that provides visibility, which is all the more essential in times of economic and health crisis.To explain...

What is the point of a budgeting process?

A budgeting process is a management control tool that reflects the company's strategic guidelines, producing a quantified vision of the future. It is a kind of dashboard that helps guide and determine the company's strategy.


It makes it possible to:

  • determine priority investments;
  • delay expenses;/li>
  • set objectives for operational staff.


More broadly, a budgeting process helps you improve decision-making, identify problems before they arise (cash flow difficulties, etc.) and, therefore, manage your money more effectively.

Note: the budgeting process must be adapted as you go along. It involves a certain amount of movement back and forth between management and operational staff in order to refine the allocated budgets.

How do you set up a budgeting process?

Setting up a budgetary process is not a matter of improvisation. There are a number of essential steps.


Bring your team leaders together

Budgeting is a corporate project, which all departments should be involved in. This is why you need to bring together your company's team leaders, so that they can present an assessment of the previous year and their prospects. This feedback is used to define everyone's needs and to draw up the initial forecasts.


For your part, this meeting is an opportunity to redefine:

  • the company's development priorities;
  • opportunities;
  • threats facing it and the market in which it operates - a particularly important point in these times of medical and economic uncertainty.


It is essential to show that you are learning and listening at this step of the budgeting process. You will be able to discuss their budget with each team leader - an essential prerequisite for them to stay within their budget.

Note that this meeting should take place two to four months before the end of your accounting year.


Develop a reverse plan

You then need to draw up a reverse plan and appoint a manager (financial director, chartered accountant, management controller, etc.) within the company to draw up a budget memorandum containing all the forecasts and targets set.


This document includes:

  • an estimate of overheads and commercial expenses;
  • research and development investments;
  • financial transactions;
  • sales forecasts;
  • an assessment of working capital requirements, etc.


After defining each person's tasks, deadlines need to be set. Each task can take between two and six months.


Add figures to the budget guidelines

Once the budget memorandum is complete, you need to add figures to your budget guidelines. This includes defining turnover, margins and projected profitability based on past, current and future income and expenses. These figures can be recorded in a simple spreadsheet or in a more sophisticated management tool.


Finalise the budget

Once figures have been added to the budget guidelines, it is time to meet your department heads again to finalise the budget. At this meeting you may want to redefine priorities and make some final adjustments in terms of investments

A summary should then be sent to the various department heads. It should include the objectives to be achieved and the resources allocated to each department.


👉 Do you know?

Budgets may need to be amended. It is important to monitor performance monthly or quarterly, in order to see whether any corrective actions are needed. Your sales may ultimately be higher or lower than expected. To do this, you should organise regular meetings with department heads.


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