Preparing and Implementing a Traditional Budget

Projecting Future Income From Past Performance

Calculator key pad

Budgets are one of the key ways in which power is devolved in an organization.

© iStockphoto/ackleyroadphotos

In many organizations, it's common to base future plans on what has worked well in the past. You may even do this yourself.

For example, you may have developed checklists to carry what you've learned from piece of work to the next, or you may have based a new project on one that was previously successful.

This concept can also be used when preparing budgets. When it's applied formally, this is known as traditional budgeting, because it's a well-established method of forecasting costs and income.

A traditional budget is based on the previous year's figures. However, these figures are updated to include the new year's predicted sales, changed costs, and additional, relevant information that has been gathered since the last budget. In this article, we'll look at traditional budgets in more detail. We'll also outline how to set them up, and how to manage them.

About Budgeting

Budgets are used to outline an organization's financial goals for a set period (typically a year). People then use the budget to monitor progress, by comparing actual performance against projected results.

However, budgets have another essential function: they're one of the key ways in which power is devolved within an organization. They give managers the flexibility to run things their way – within reason – provided that they meet their agreed budget.

As such, if you're preparing a budget, it's essential that you have a clear understanding of how you plan to achieve the targets that you've set yourself and your team.

Why Use a Traditional Budget?

When you prepare and manage a traditional budget, you can do the following:

Access the Full Article

This resource is only available in full within the Mind Tools Club.

Learn More and Join Today

Already a Club member? Log in to finish this article.
Add this article to My Learning Plan

Where to go from here:

Join the Mind Tools Club

Click to join Mind Tools
Printer-friendly version
Return to the top of the page

Your Score
Create a Login to Save Your Learning Plan

This ensures that you don’t lose your plan.

Connect with…

Or create a Mind Tools login. Existing user? Log in here.
Log in with your existing Mind Tools details
Lost Username or Password
You are now logged in…

Lost username or password?

Please enter your username or email address and we'll send you a reminder.

Thank You!

Your log in details have been sent to the email account you registered with. Please check your email to reset your login details.

Create a Mind Tools Login
Your plan has been created.

While you're here, subscribe to our FREE newsletter?

Learn a new career skill every week, and get our Personal Development Plan workbook (worth $19.99) when you subscribe.

Thank You!

Please check your Inbox, and click on the link in the email from us. We can then send you the newsletter.