Budgeting Basics and Beyond

1.8. Budget Weaknesses

The signs of budget weaknesses must be spotted so that corrective action may be taken. Such signs include:

• Managerial goals are off target or unrealistic.

• There is management indecisiveness.

• The budget takes too long to prepare.

• Budget preparers are unfamiliar with the operations being budgeted and do not seek such information. Budget preparers should visit the actual operations firsthand.

• Budget preparers do not keep current.

• The budget is prepared using different methods each year.

• There is a lack of raw information going into the budgeting process.

• There is a lack of communication between those involved in budgeting and operating personnel.

• The budget is formulated without input from those affected by it. This will likely result in budgeting errors. Further, budget preparers do not go into the operations field.

• Managers do not know how their budget allowances have been assigned or what the components of their charges are. If managers do not understand the information, they will not perform their functions properly.

• The budget document is excessively long, confusing, or filled with unnecessary information. There may be inadequate narrative data to explain the numbers.

• Managers are ignoring their budgets because they appear unusable and unrealistic.

• Managers feel they are not getting anything out of the budget process. Changes are made to the budget too frequently.

• Significant unfavorable variances are not investigated and corrected. These variances may also not be ...