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I'm currently at a point in my career where I'm trying to make the leap. A lot of the positions I'm looking at require some knowledge (if not in-depth) of the corporate budgeting process. I've had some experience here and there, but only bits and pieces. Here is my general understanding of the process: Upper management decides on a growth target for the coming year/quarter. With this goal in mind, they create a general budget based on current revenue plus projected growth. This is the money they have to spend on the company. My question is how this drips down from upper management to individual departments. Do department heads go to their bosses and say "This is how much money I need this year/quarter", or do their bosses tell them "This is how much money you have to spend"? How does one estimate a budget? Who in an organization would calculate and report the company revenue versus the budget? I know it'd be somebody in the finance area, but I'm not sure whom. I remember one year, the president addressed the company and made a statement like "The company set a very aggressive budget and we're having trouble hitting it." Does that mean they overestimated the amount of growth the company would experience, or that there were revenue shortfalls in already-existing areas thought to be sustained, or both? Any information on the entire process in general would be very helpful.
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Aug 4, 2016 15:20
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| # ? Apr 19, 2024 11:59 |
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My background - Games/software producer (middle-management) for small games (>$1k) up to $20MM budgets for consoles/PC etc. I write the estimated line item budgets for projects, hand them off to either my boss or my client to review, revise and approve(or decline). 1. As a dept head, you give an estimate (i need to hire X staff, need Y equipment, want to expand Z product) whatever it is. Usually these are rough line-item costs. These go up the food chain to ultimately get laughed at and declined 90% of the time. Usually the boss will dictate what they want done and provide the limitations in which you have to work with. (we want to make a WOW killer, here's $400 and 3 weeks and you can only have 4 staff members, one of which must be a goat).... etc. 2. How does one estimate a budget? Comparison to previous project or competing products/services help. Cost of Goods help. Industry standard salaries help. When in doubt, just ask for numbers, like "hey how much for the happy ending?", most anyone will give you an estimate. 3. Who in an organization would calculate and report the company revenue versus the budget? - We always had a "controller", usually a COO that handled the company accounts. We'd usually issue invoices and such to this person (or their wage slave) for payment. They log the expenses and usually do the other accounting tasks. 4. "The company set a very aggressive budget and we're having trouble hitting it." - This is bullshit corporate smoke screen code-speak for "layoffs incoming, gently caress you all because I need a bigger CEO bonus this year for my 4th mansion in the Hamptons". Also usually means that they are gambling with the company stocks which failed and devalued, leaving the company's assets worth less than previous year so to keep operating they need to cut the highest operating cost, which is almost always salaries/wages and employee benefits. This can also mean that various products/services flat-out failed or were cancelled before they even turned a profit, putting the company in the red. Seriously, budgeting is as simple as getting estimates and putting numbers on a spreadsheet then adding some "padding" to try and compensate for any potential or unforseen overages. Also never work for free. 
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Aug 5, 2016 04:51
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A lot of modern budgetting uses 'zero based' techniques http://www.investopedia.com/terms/z/zbb.asp Essentially, you build up your budget from the bottom up. The budget is built around achieving the business goals. These are in theory set out in the business plan for each department. However, a lot of old school companies just use last year's and then argue over savings and goals. As has been said. it's usually mainly bullshit.
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Aug 5, 2016 07:37
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I'm glad my budget is "be responsible"
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Aug 7, 2016 03:52
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Slayerjerman summed it up pretty well, and in the first post, no less. In my experience, it is mainly a game of... I need $200k to achieve (x goal) in my department this year. I will ask for $400k so they will give me the $200k I need. They end up giving you $150k and you squeeze juice from a turnip all year to achieve your goal.. the next year you ask for $500k to get your $200k. They give you $250k and now you have to waste $50k so it doesn't look like you were lying. Furthermore... If it were a household budget, you might ask for $500/yr for water so you don't die $5000/yr for food so you don't starve $250/yr for movie tickets and when the budget comes back, you will get $0 for water $4000/yr for food $1500 for movie tickets And you will think to yourself what loving good are 6x the amount of movie tickets I asked for when we're all going to die of dehydration, we seriously can't even survive without water and there's no loving way we could spend that much on movie tickets even if we went twice a week. But there it is. I had no idea how hosed up it was before I got involved with it.
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Aug 7, 2016 05:50
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photomikey posted:Slayerjerman summed it up pretty well, and in the first post, no less. At today's prices, $1500 is enough for ONE movie with a family of 4... and thats if you all share the same large soda. ;-) A common tactic to re-balance a wonky budget is to get a large petty cash fund, then pay your main expenses out of that. I know some companies have had me invoice odd departments for work unrelated to them. Such as billing artwork to a programming department because they have the extra funds just sitting there.
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Aug 7, 2016 08:52
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Actual quote from someone whose totally unnecessary expenditure we we're querying: 'Listen son, if I don't spend this money, it will get taken away next year.'
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Aug 9, 2016 09:47
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| # ? Apr 19, 2024 11:59 |
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Also the arguments between departments, such as: HR wants to upgrade the workforce management software, this will also require upgrading the server that hosts the software, HR is "ok" with paying for the software upgrade (after a bit of fighting, they feel it should come out of uh the billing departments budget for :reasons:), but they say that the server upgrade should come out of ITs budget because they didn't plan for expansion. Flashback 5 years when the software was implemented, HR refused to budget for expansion, IT recommended they do so because workforce is expanding at a massive rate of N^2 every 3 years and the people that produce the software are coming out with a major update in 3.25 years , but finance and the CEO denied ITs request and things moved forward. server upgrade costs 200k, HR fights, gets their way, ITs budget of 500K for the year has just been cut by 2/5s. Get wrekt nerds. (numbers are made up obv, but the moral of the story stands) This will happen, or at the very least, the fights about who actually pays for something will happen often.
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Aug 9, 2016 21:36
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