Almost every manager is involved in budgeting. It is normally one of the least desirable tasks for most managers.

A budget is simply a plan of what the company is going to do financially. If the budget is for a specific department, it is that group’s plan.
Budgets can be one of the most useful tools for a manager. It is important to develop a realistic budget that is achievable. It is also important to budget for improvement. Once the budget is completed, it is the manager’s job to meet it.

However, there is no crystal ball, and that is why it is called a budget rather than the actual P & L.

It is the manager’s job to compare every line item on the income statement versus the budget. The difference between the budgeted line item and the actual number is the variance.

The manager should know why every number varied. For example, if labor expenses are higher than budget, the manager should know why. The manager should also develop a plan to meet the budget in the next period.

It is important for managers to share budget information with the individuals that can impact it. For example, if the maintenance budget is 2.2% of sales, or $20,000, the maintenance leader should understand it.