Business Core · Finance · Module
Budgeting
Allocating money to intentions for a period ahead. A budget is a set of decisions expressed in numbers, not an administrative exercise.
The idea
How it works
A budget built by adjusting last year’s numbers encodes last year’s priorities, including the ones nobody would defend if asked directly. Incremental budgeting is efficient and quietly conservative.
The budget is where strategy becomes visible. If a stated priority receives no more money than it did before it became a priority, the budget is the more reliable statement of intent.
Working with it
In practice
- 01
Check the budget against the strategy
Priorities that receive no funding change were not adopted, whatever the plan says.
- 02
Rebuild some lines from zero
Not all of them — that is exhausting. Rotate through, so every line is examined every few years.
- 03
Treat variance as information
A variance says the world differed from the assumption. Whether that is a failure depends on which.
- 04
Budget for the unknown deliberately
A contingency line is honest. Padding every line to create a hidden one is not, and it destroys the numbers.
One level in
The components of budgeting
A component is something that exists afterwards which did not exist before — a deliverable or a mechanism, not an intention.
The strategy check
Where the money moved compared with last period, and whether that matches stated priorities.
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If a stated priority receives no funding change, the budget tells you what was actually adopted.
The other modules in finance
Forecasting
A current estimate of where the numbers are heading, updated as the world changes. Distinct from the budget, which is a commitment.
LearnCash flow
Money actually moving in and out, by date. Profitable organisations fail here, which is why it is tracked separately from profit.
LearnFinancial reporting
Turning transactions into a statement of what happened, for people who have to decide something on the basis of it.
Learn