Preparing an Operating Budget—Goals and Assumptions

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Defining goals

Mei Po contemplates her budgeting goals.

Some goals may be set by senior management, while others are determined by the individual department or unit. These goals will reflect both the organization's larger strategic priorities and the department or business unit's tactical goals. Examples of questions you might ask to help define your department's tactical goals include:

  1. What technological changes are affecting the industry?
  2. How can current processes be improved?
  3. What longer-term initiatives need to be considered in order to position the company for the future?

Achieving these goals requires choosing tactics that may in turn affect the budget.

Examples of Goals, Options, and Budget Impacts

Goal

Options

Budget Impacts

Become the most reliable provider of Internet services

Maintain state-of-the-art equipment

Requires capital investment

Train the most skilled repair teams in the field

Higher labor and training costs

Provide the most timely customer service

Increased spending on customer support

Increase revenues by 10%

Raise prices

Lower sales volume, higher gross margin

Expand marketing

Increased sales, higher marketing costs, increased production costs

Enter into partnerships

Increased revenues, higher production costs, higher selling costs

 

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