A budget is an estimation of revenue and expenses over a specified future period of time and is usually compiled and re-evaluated on a periodic basis. Budgets can be made for person(s), a for-profit business, a government, or a non-profit enterprise. Budgeting is the tactical implementation of a financial plan. 

To achieve the goals in a business’s strategic plan, we need a detailed descriptive roadmap of the business plan that sets measures and indicators of performance. We can then make changes along the way to ensure that we arrive at the desired goals.

Translating Strategy into Targets and Budgets

There are four dimensions to consider when translating overall strategy, such as mission, vision, and goals, into budgets.

1. Objectives are basically your goals, e.g., increasing the amount each customer spends at your retail store.

2. Then, you develop one or more strategies to achieve your goals. The company can increase customer spending by expanding product offerings, sourcing new suppliers, promotion, etc.

3. You need to track and evaluate the effectiveness of the strategies, using relevant measures. For example, you can measure the average weekly spending per customer and average price changes as inputs.

4. Finally, you should set targets that you would like to reach by the end of a certain period. The targets should be quantifiable and time-based, such as an increase in the volume of sales or an increase in the number of products sold by a certain time.

Budget Components

Data