Budgeting

We all know how important budgeting is in the corporate setting. This is especially true today, now that virtually all companies all over the world are going through this massive economic breakdown affecting all aspects of our daily lives. This is precisely why today's corporations give due credit to the aspect of budgeting, which leads us to another extremely important aspect to discuss. To ensure the efficient carrying out of budgeting, then there must be a measurement system put into place, to gauge just how efficient the activity of budgeting is. Simply put, there should be quantifiable measures implemented to check just how efficient the budgeting efforts of the company have been. And these quantifiable measures would be in the form of none other than budgeting indicators.

By definition, budgeting is carried out through the estimation of values for the several financial parameters that corporations take on. These parameters are very much needed because they are related to all sorts of financial requirements that the organization itself would take on in the future. Budgeting would start with the estimation of 'sales', and then would move on to 'recruitment needs' the same needs that the company would have to take on in order to accomplish 'sales' and then from there, the estimation of 'appropriate fund sources' as well as the organization of efforts towards 'repayment of debts' would then be carried out. This is, more or less, the usual flow companies take on when budgeting and allocating their different monetary resources.

As with any balanced scorecard containing indicators and quantifiable measures, there are also perspectives to consider when developing your own set of budgeting measures. These perspectives are as follow: Management, Structural, Continuous Improvement and Learning, as well as Conformance.

The Management perspective, of course, caters to all managerial aspects of the organization. The following are the commonly used indicators for this perspective: success ratio, percentage increase in forecasting accuracy, and the number of methods and sources used in financial forecasting and budgeting.

The Conformance perspective, on the other hand, tackles just how far the organization goes when it comes to conforming to required norms. Indicators that can be used here include percentage of employees who are agreeable with the estimations released, objective fulfillment ratio, debt coverage index, and the degree of equity-debut alignment.

Structural perspective is all about the structure taken on by the budgeting efforts of the company. The indicators used here include the frequency of budget preparation, the percentage of data in an area for which the budget is being prepared, as well as the cross-checking methods used.

The last perspective, which is continuous improvement and learning, contains indicators that tackle the efforts of a company's budgeting endeavors towards constant improvement and progress. The indicators here include cost decline fraction, usefulness ratio, the percentage decrease in terns of time for the budget estimations, as well as the percentage drop in deviation. All of these indicators are geared towards using effective practices deemed from past experiences during the regular budget preparations taken on by the organization.