Designing, Preparing, Executing and Evaluating the Corporate Budget

Whether you are starting out in your career, determining your retirement goals or managing a business, your future success or failure is based on how well you design, prepare, execute and evaluate your strategic plan and budget.

There are many reasons why startups and businesses fail.  One main reason is the lack of a reasonable, quantifiable strategic plan and budget.  Outlined below are the phases involved in producing a budget that is helpful in guiding the financial success of the company.


The first step in the budget process is the design.  This step is the most critical, but given the least time and focus.  During the design phase the owners/partners and executive management should have an off-site meeting (1 day or more) 2 or 3 months before the end of their fiscal year to document a strategic plan for the upcoming year.  The “design team” should discuss how they have been doing compared to last year’s strategic plan and budget.

A strategic plan is simply a corporate guide.  The strategic plan should have overall corporate goals and departmental goals for the upcoming year.  These goals should be quantifiable and reasonable.  Once these goals have been determined they need to be calculated on a monthly basis.  Once the strategic plan has been finalized, the budgetary process should be started.  The budget is a financial tool based on the strategic plan to guide the organization in the right financial path and understand during the execution phase, what went right and what did not.


Preparing the budget is the second phase.  During the preparation process, the budget is built.  Budgets are mainly built in Excel and once complete it is either loaded directly into the accounting application or keyed in manually.    There will be numerous tabs in your Excel budget worksheet.   The 1st tab (linked from the 2nd tab) is usually the summary consolidated financials by Qtr with a YTD total and associated percentage of total of revenue columns.  The information in the 1st tab will be updated each time information is completed in the 2nd tab. The 2nd tab is the monthly financials by month with a YTD total and associated percentage of total of revenue columns.  The following Excel tabs should be category tabs that will link to the 2nd tab:  Revenue, Other Revenue, Cost of Goods Sold, Payroll, Operating Expenses, Depreciation, Other Operating Expenses, etc.  All of this data will be broken down in detail by account and by month.  Assumptions should be documented and included within each category tab.  Don’t forget about a balance sheet and cash flow once the income statement is finalized.  Make sure you have incorporated formula checks and report checks within the budget.


Once the budget has been loaded by month, the budget should not be changed, only explained, unless there was a material mistake made in the budget.  As part of the normal monthly accounting review process the internal accountant should supply to executive management an analysis of why actual vs. budget variance(s) exist.  This will allow management to understand how the company is doing compared to the strategic plan and budget.


The Accounting department and executive management should continually evaluate how successfully the company is operating, as designed by the strategic plan, against the budget.  Executive Management should work toward the strategic plan and for the long-term success of the company, but understand their decisions good or bad will have a financial impact.  By learning and understanding what went well or not during the strategic planning and budget process, changes can be made in the future.  These processes are an on-going fine tuning process that each year will become easier and produce more accurate results.

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