KnowledgeLeader Blog

A budget is a systematic method of allocating financial, physical and human resources to achieve strategic goals. Companies develop budgets in order to monitor progress toward their goals, help control spending, and predict cash flow and profit.

In a previous blog on Managing Mergers and Acquisitions KPIs we discussed what exactly Key Performance Indicators are:

“KPIs are generally defined as quantifiable measures used to evaluate the success of an organization, employee or process in meeting the objectives for performance. In other words, you can only really know if you did well if you know how success is measured.”

Opportunity risk occurs whenever there’s a possibility that a better opportunity may become available after having committed to an irreversible decision.

We all experience opportunity risk at its most basic level several times a week. For example, imagine you have enough cash on you for lunch in a new town and you’re trying to decide between two restaurants you’ve never tried. What if you spend your time and money on the first option and it’s terrible? Or even maybe it’s not terrible, but the second option is just so much better?

Budgeting is a systematic process for:

• Expressing future plans in formal quantitative terms
• Allocating resources to achieve strategic goals
• Monitoring progress toward goals
• Controlling spending
• Predicting cash flow and profits
• Serving as a vehicle for communicating plans in an orderly manner throughout the organization