I started my career in a small company. One of the many benefits of a small company is that there are only simple budgets to manage. When the company grew and later when I moved to an MNC the honeymoon was over and I had the painful comprehensive budget process to endure.
It was an exercise in futility as we tried to achieve simultaneously "you can't do that" and "you must do more". Most managers in large corporations share similar views. So you may be surprised when I advocate that all businesses should embrace the budget and the budget process. If one doesn't exist, create one.
The first step to removing the pain is to accept that budgets are really four separate processes, each with their own goal.
Budgets are:
A goal setting tool
What are we going to achieve?
A planning tool
How are we going to achieve it?
A co-ordination tool
How can we work together to ensure our success?
A measurement and accountability tool
Did we achieve it (and so should we get a bonus)?
Budgets become frustrating when, as so often happens, the four processes are confused into one task.
Deal with each component of the process separately.
Start with goal.
Be aspirational.
Then develop a plan to achieve that goal.
Go back and adjust the goal if either the plan is not feasible or it turns out even more is possible.
Check the dependencies on other departments and functions.
Finally, when a complete and workable plan has been developed, look at measurement and accountability.
Set the rewards according to the level of achievement and risk in the plan.
