A budget is a financial plan that outlines how a company expects to generate and use its financial resources over a specific period of time, such as a month or a year. Budgets help a company manage its expenses, allocate its resources, and track its progress towards its financial goals.
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Curated Learning Resources
- What Goldilocks Can Teach CFOs About BudgetingJeff lays out 4 steps for a probabilities-based approach to budgeting: 1. An ambitious sales quota, with a 30% probability of achievement 2. A revenue budget that reflects reality, with a 50% probability of achievement 3. A strategic cash budget, with a 70% probability of achievement 4: Going public — Wall Street guidance, with a 90% probability of achievement
- 4 Ways to Take the Heartburn Out of BudgetingFrederic leverages his experience to describe 4 ways to make budgeting more effective: 1. Divide Your Budget by Corporate Priorities, Not By Teams 2. Drive Buy-In and Accountability With An Open and Inclusive Process 3. Design Three Budgets: Over, Under, Match 4. Pick A Fiscal Calendar that Works for You
- How to Ruin Your Company with One Bad ProcessBen argues that founders can harm their businesses by mishandling the budgeting process. This can happen when they set goals without constraints, leading to departments leaders "gaming" the budgeting process. In this scenario, managers may try to increase the scope of the goals, make unrealistic demands, or socialize their ideas and newly found money with their teams, which can create a culture of chaos and lead to the company's downfall. Instead, Ben recommends to set clear financial targets and hold the team accountable for meeting them, and to be transparent about the budget and its limitations. It is also important to keep in mind that the budget is not a fixed plan, but rather a tool for tracking progress and making adjustments as needed.