Practical Application: Creating a Corporate Budget

Instructor: Mary Matthiesen-Jones

Mary has worked around the world for over 30 years in international business, advertising, and market research. She has a Master's degree in International Management and has taught University undergraduate and graduate level courses .

Every corporation, big or small, needs an accurate budget in order to prosper. Here you can consider some of the key questions to be answered in order to develop an accurate, realistic budget.

The Importance of a Corporate Budget

Anyone who has worked with computers is probably familiar with the expression ''Garbage in, garbage out''. If the input into a computer program is flawed, flawed results are the outcome. The same holds true for corporate budgets.

As you learned in the lesson How to Prepare a Budget for a Corporation, budgets are a tool for both corporate planning as well as evaluation. The ability to construct a solid corporate budget is a key skill for managers in any business.

Budgets encompass the totality of a business, including all expenses and income, sales, and the required human and physical resources. Corporate budgets are often composed of smaller budgets such as sales, production and administration.

There are specific criteria for budgets. The best budgets are:

  • Focused - it covers a specific time frame.
  • Comprehensive - it includes all important information.
  • Purposeful - the scope addresses a specific business situation.
  • Accurate - data is solid and well supported.

Ask the Right Questions

Preparation of a corporate budget that meets all of these criteria starts with asking a series of questions.

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