So most companies have a big corporate office and a bunch of regional offices that they allocate money to, I get that. Let’s say a given office gets a $500,000/yr operating budget (just throwing out a random number). How do they spend exactly $500,000? Because they obviously don’t want to go over budget but they don’t want to have a surplus and lose $ next year. So is there wiggle room? Would they spend $499,995 or something?
In: 485
I have been with multiple billion dollar companies as a financial analyst. Even a fotune 100. None of them hit their budget. In a more controlled business like manufacturing, it is typically easier to stay on track and forecast cost. Construction, on the other hand, is much more difficult to predict. Weather conditions, ordering parts, rework, etc. can drastically throw you off track. Regardless, most companies will be anywhere from 5% to 200% off their initial forecast.
If you want a more accurate budget it is good to do one on a monthly basis. I am at a smaller company now which forecasts 12 months but once a year. So when we look at our budget for June that we forecasted in December of the prior year, it’s never close. I am working on a way to forecast easily monthly but I have only been there for a few months.
Latest Answers