3.1 What are budgets used for?
Budgets can be used for:
- Planning: All activities involve the use of resources and their conversion into goods or services. Planning what to do when and what to use is a key activity for organisations.
- Coordination: By obtaining regular information about how areas are performing, managers can assess performance and act together to take any corrective action required.
- Communication: A budget provides a commonly understood tool and language for expressing what the issues are for teams and to keep senior managers (and trustees) informed.
- Motivation: Knowing what is expected and working to exceed it can be a hugely motivating experience for teams and individuals. Budgets allow meaningful targets to be set and worked towards.
- Control: Using the feedback provided by budgetary information, managers can take corrective action on an ongoing basis to ensure their team performs well.
- Evaluation: Budgets allow actual performance to be compared with what was planned or committed to.
Many of the points on the list may not involve you and they can sound like something bigger organisations have to do. However, all organisations will use these processes to some degree, and not just at a senior level. More importantly, it illustrates that budgets are not static numerical information but tools to guide organisations in meeting their objectives.