Beyond Budgeting: A New Approach to Annual Budgets

In their book, Beyond Budgeting, Jeremy Hope and Robin Fraser highlight the inadequacy of traditional annual based budgeting and argue passionately for a new management model that can cope with the volatility of today's business environment. Their model embraces much more than just budgeting, it is more a philosophy of decentralization and a way of encouraging managers at all levels to become accountable for their performance without tying them to an annual budget straitjacket.

Hope and Fraser analysed many companies of various types that have abandoned traditional annual budgeting in favour of their new model and found that management gained a new sense of empowerment and a "can do" attitude. In addition, they benefited from faster and more adaptive decision-making, reduced bureaucracy and lower costs. The companies became more competitive and customer satisfaction improved along with many of the company's' KPI's (Key Performance Indicators).

The new model replaces annual budgeting and centralized control systems with multilevel controls that include effective governance, fast financial actuals, trend analysis, rolling forecasts, key performance indicators, performance ranking, and management by exception.

Its probably no surprise that annual budgeting is expensive and time consuming, but just how much time companies are spending on the process and how useful are the results, should be of concern to all senior executives. Hope and Fraser found that the budget process typically starts at least four months prior to the year to which it relates and grinds its way through countless meetings where managers negotiate targets and resources. An estimate of 20 to 30 percent of senior executives' and financial managers' time is absorbed in the process, while the Ford Motor Company concluded that they spend $1.2 billion per year on forecasting and budgeting.

Quite apart from the cost, the budgets this process produces are often meaningless. The forecast numbers are out of date before the budgeting round has finished. Even the numbers themselves are suspect. Having been agreed upon during countless negotiations, they are based more on politics than strategy. A manager's performance is often related to achieving targets set out in the annual budget, which inevitably leads to a conflict of interest. Managers will attempt to negotiate the lowest possible targets and avoid taking risks.

Without going into the whole management philosophy, which is covered in commendable detail in their book, the control systems clearly needed in today's volatile world must be fast and flexible to be relevant. In the companies that successfully implemented their model, Hope and Fraser say: "All our case examples use rolling forecasts in one form or another to provide a fast, high-level view of future performance".

Our budgeting software product, Budget Controller was design to do just that. We believe it's the ideal tool to help managers move from the cumbersome traditional budgeting process to one of fast rolling forecasts based on business modelling techniques that can help mangers to continually adapt their strategy in an unpredictable world.

For more information on budgeting and to purchase Jeremy Hope's and Robin Fraser's excellent book, Beyond Budgeting, visit www.markitquest.com.


About the Author
Mark Ritsema is the founder of Markitquest, developers of the the Controller Series; a set of Excel based financial modelling software tools for business. Mark has over 20 years experience in financial management, having worked in various industries as Controller and Financial Director for companies both large and small.

How To Choose Accounting Software

Choosing accounting software can be confusing. The fact is you are looking for accounting software because accounting is a complex matter that you'd like to simplify. Choosing the right accounting software will help you simplify your finances, but choosing the wrong one will only complicate matters further. It is really important that you choose your accounting software based upon your needs and not just product reviews. This ensures that your needs will be met and you will be comfortable with using the software.

There are many different types of accounting software with many different features. Personal accounting involves bank account monitoring, loan management, investments and budgeting. It is important to focus on accounting software aimed towards personal finance rather than business finance. This will help you to narrow down your choices to ones that are most likely to work for your needs.

The first step is to check out what accounting software is on the market. Look at websites, in stores and anywhere else you can find the information. You can even ask friends or family if they know of a good software program. At this point you are trying to gather information about features available and names of certain software programs.

The next step is to make a list of all the products you found out about. You can now do some deeper research. Look for information about each product. Find out the features and anything special that may make the product stand out, like products that are made specifically for the beginner.

Now you can look over your list and eliminate any that do not impress you or look like they are lacking something you will need. You should also look at how much they cost and eliminate programs that cost too much.

Once you have the list narrowed down you can try to get an evaluation code from the manufacturer. Most companies will allow you to download a demo so you can try the software yourself. This will allow you to figure out the ease of use and if you like the general layout of the program.

After you have tested the software on your list you should easily be able to narrow down your choice to one accounting software program that meets your needs.

Stephen Kreutzer is a freelance publisher based in Cupertino, California. He publishes articles and reports in various ezines and provides accounting software information on All Your Topics!

Fortune 500 Budgeting For Our Personal Lives

January and February are traditionally busy months in the financial industry as many New Year's resolutions typically include the goal of becoming debt free or saving for a major purchase. While many of our clients understand the importance of getting professional help when managing their business bookkeeping, only a few think to ask for our services in managing their personal finances.

In the business world, a budget is a financial framework that provides checks and balances to prevent overspending and ensures the availability of funds should the company run into unexpected trouble and requires capital. These same principles can be applied to our personal lives.

We are still close enough to the Christmas holidays to understand how easy it can be to overspend. Presents for the kids, dinners with family and friends, new clothes for the New Year's Eve party all can add up to significant debt come January. I'm reminded of a Visa commercial that typically gets a lot of airplay in December: The postman comes bearing the monthly bills. The Visa statement is opened showing a large listing of purchases all with zero balances and the recipient can't believe his luck and faints from the shock. The commercial advertises the Win What You Buy Contest. The more you buy, the more chances you have to win. A certain recipe for financial disaster!

While statistically speaking I don't know the chances of winning the Visa promotion, I haven't met or read about one person who has. We shouldn't base our spending on the chances of winning our purchases or even the lottery. With a little common sense and a trusty calculator, you can manage your spending and save for the future and for unexpected expenses - and feel like you've won the lottery!

Fortune 500 companies rely on budgeting and financial reporting. CEOs of major corporations do not make a move without consulting their financial plan. Revenue and expenses are carefully tracked and estimates are created for variable expenses. Corporate debt is studied with the goal of reducing amounts owing without incurring additional debt. Money is diligently earmarked for future expenses and "rainy days." Almost every financial expenditure is determined a year before incurred - a business cannot thrive without actively managing its cash flow. Most people understand that business success relies on creating a budget and sticking to it. I'm here to tell you that personal success does too.

Everyone talks about setting up a budget and sticking to it, but how do you really go about figuring out what your budget is, or should be? There are a few simple steps to creating a personal budget. We'll use the example of Steve, a computer technician.

1. Calculate your income

Calculate your monthly household income from all sources: salary, investment income, pension funds, lottery winnings - both yours and that of your spouse or partner.

For example, Steve earns $50,000 after taxes annually. He has no other income. Dividing by 12, Steve calculates his monthly income as $4,166.67.

2. Determine your ESSENTIAL expenses

Steve has certain fixed monthly expenses. He lists them as: - Mortgage payment - Groceries - Automobile lease payment - Automobile Insurance - Utilities - Fuel

3. Calculate a monthly cost for ESSENTIAL expenses.

The expenses that Steve has deemed essential are a mix of fixed and variable costs. He notes the fixed payments first, assigning their values as: Mortgage payment$1,300 Automobile lease payment$ 385 Automobile insurance$ 130

To better gauge his variable expenses, Steve creates an expense log and records all his purchases for the two-month priors to setting up his budget. He also examines his old utility statements to determine his average expenses and is able to assign the following values: Groceries$ 200 Utilities$ 400 Telephone (incl. Long distance) $ 50 Fuel $ 250

Knowing that his variable expenses are based on an average of prior expenses, Steve sets aside $200 per month to cover periods when expenses may be higher than his estimate.

Steve calculates his monthly ESSENTIALS cost as $2,915.00 4. Determine and calculate your non-essentials

Steve examines the spreadsheet he created for step 3 and identifies some other common expenses. Entertainment $ 50 Meals (incl. Daily coffee)$ 100 Gifts (weddings, birthdays, etc.)$ 100 Books and magazines $ 50 Miscellaneous $ 25

Steve's monthly non-essential expenses total $325

Steve creates a new spreadsheet with the information he has calculated thus far. He calculates his disposable income as: Monthly income: $4,166.67 Less: ESSENTIALS$2,915.00 Less: Non-essentials $ 325.00 Disposable income$ 926.67

5. Establish monthly contributions towards debt elimination and savings:

Steve amassed some debt while in school and owes $5,000 on his credit line. He would also like to purchase a vehicle rather than lease and plans to take a trip to Europe in two years to visit family.

He decides on the following monthly contributions: Debt$ 450.00 Savings$ 300.00

Steve deducts his monthly contributions from his disposable income and is left with $176.67, which he decides to leave in his checking account to cover other incidentals and miscellaneous expenses he may have overlooked. He makes a plan, however, to transfer $500 to his savings account when the balance in his checking account exceeds $1,000.

It's easy to see that you can write out a plan yourself or use a software package to set up a budget - no need to hire a professional accountant. It's important to know where your money is coming from and where it is going so that you won't have any unpleasant surprises - and maybe just enough money left over at the end of the day to buy that lottery ticket you've been hoping for!

© 2005 Deborah Carraro

Deborah Carraro is a Virtual Assistant offering bookkeeping, web design, desktop publishing and business consulting services. She publishes a monthly newsletter Vascorp VA Advantage. To subscribe or find out more, please visit. http://www.vascorp.com/va

Debt Reduction By Setting a Budget

Most people avoid budgets like the plague. When mentioning a budget I’ve heard comments such as, “Isn’t that for retired folks?”, “There’s no way I can stay on a budget!” and “A budget feels so limiting, like a diet: you see something you want and can’t have it because of guilt, shame and restrictions”. Yet we all know that restricting our food intake causes weight loss and restricting our spending habits can cause debt loss.

The Basics

Creating a budget to help you achieve debt elimination is not a difficult process. You need a piece of paper, a pen, copies of your bills and expenses, and a little time and determination.

For each line, estimate (in many cases your rates are set) your housing costs, utilities, food, clothing, transportation and vehicle costs, medical and/or family expenses, entertainment and online services, credit card payments and debt priorities, and lastly, other expenses.

After you have a clear picture of your monthly expenses, factor in your monthly gross with payroll deductions. Figure your set expenses, such as housing, food and utilities, and estimate your more flexible expenses, such as entertainment and clothing.

After you have allocated your money, apply all extra funds to pay ahead on your debts. In using your money toward debt reduction instead of treating yourself to another fancy dinner or extra pair of shoes, you can watch your debt dissolve quicker than you might imagine.

Reducing Debt

If you really want to reduce your debt, there is no better way than by tracking every single penny you spend and sticking to a realistic budget. By budgeting, you can easily find where your extra money is going and oftentimes, realize how you can save hundreds of dollars that can apply directly to your debts.

Online Resources

If you feel you need a little extra information and help on the budgeting process, there are hundreds of terrific online resources that can help you plan, budget and reduce your debt. From budget calculators and worksheets, to detailed software programs, research your options online for the one that best suits your needs.

Good Luck!

Creating a budget doesn’t have to be a painful restricting process; it can put you in touch with your honest spending habits and be a rewarding experience that transforms many areas of your life.

To view our list of recommended debt consolidation companies online, visit this page: Recommended Debt Consolidation Companies Online.

Carrie Reeder is the owner of ABC Loan Guide, an informational website about various types of loans.

Article Source: http://EzineArticles.com/?expert=Carrie_Reeder

Budgeting gets a Life Sentence!! Find out why you'll never have to budget again.

An interesting source of budgeting software articles is found in the resource box for this article. You may want to check them out...

A new approach to budgeting is about to revolutionise our perception of budgeting – or more accurately, to do away with budgeting altogether! If you're anything like me (and my friends and my relatives and my neighbours and my kids' teachers and my hairdresser, but you get the picture!) you think of budgeting as a restrictive and demoralising task that makes life a misery.

That's about to change! LifeBudget is a unique way of managing day-to-day income and spending that turned this reviewer's idea of budgeting on its head! Forget the boring hours each week typing my spending into a spreadsheet or keeping a notebook in the car to record every cent I spend. Forget the worry about cutting back on groceries so that the gas bill gets paid on time. And best of all, forget the continual hassle with the kids about how much take-away this little income-earner can afford in a week!

It's so simple (and cheap to buy) that I admit I was sceptical. But this way of budgeting really does work! More than that, once you've followed the clear step-by-step guide (no fiddly software to mess with) you'll never have to work hard at budgeting again! Yes you will actually have to put in that first bit of effort so that your budget suits what you want to achieve, but it's worth it when you see the results. Money for me each week - I want that magazine, I buy that magazine! Bills paid on time! And money over to save a little!

To get started takes no longer than it takes for me to watch a movie and because it's not a software package, it costs around the same as a reasonably inexpensive bottle of wine. But best of all for me (who hates doing the same thing more than once) it works so well that it's the last budget I'll ever need to have.

It's also worth checking out the website (www.lifebudget.com) for the fun bits – like the Good fairy, bad fairy test (I passed!) and the Money Personality Quiz (oh well, 1 out of 2's not bad). This product will make a difference to a lot of people, especially anyone who's disenchanted with the budgeting products that are on the market right now.

This article courtesy of http://www.budgeting-software.org.
You may freely reprint this article on your website or in
your newsletter provided this courtesy notice and the author
name and URL remain intact.

Personal Asset Preventive Maintenance Software

by Jennifer Bailey

Personal asset preventive maintenance software exists to help people manage and maximize the value of their assets. Common types of personal asset preventive maintenance software deal with taxes and investments. Software that manages other types of personal assets, such as property, is also available. Personal tax software can help users avoid overpaying taxes while also streamlining the tax-paying process. Some advantages include information about available tax deductions and the option to electronically file the required forms. To help maximize the user's deductions, the programs require comprehensive information about the user's assets. This information is then processed and the user is alerted to all available deductions. Some software has advice for investors on how to best take advantage of tax laws. While filing electronically usually costs around $15, some tax software includes the option to file electronically for free. Filing electronically allows the taxpayer to receive his or her refund more quickly.

Several money management software programs like Quicken and Microsoft Money can be used as personal asset preventive maintenance software. These programs have features like automatic bill pay, budgeting features, and savings and investment advice and information. Automatic bill pay saves the user from having to remember when a bill is due. This prevents the user from having to pay late fees if the bill is not paid on time. Most personal asset preventive maintenance software programs include budgeting features that allow users to plan for the future and forecast how much money they will have available. The investment information and advice helps the user to maintain savings and retirement funds by keeping investors aware of current market trends and future predictions.

Personal asset preventive maintenance software helps people avoid financial emergencies by providing money management assistance. Such software makes personal finance less stressful and time-consuming.


About the Author
Preventive Maintenance Software Info features detailed information on preventive maintenance software for health care and correctional institutions and more.