The leader of a budget process
The leader of a budget process
The person who is ultimately responsible for the framing and creation of the Budget for a project is known as the Budget Head for that project. The Budget itself is a document that lists the expected revenues and expenditures associated with a project.
The term project here encompasses a very large number of activities. Each of these activities would, in turn, have a slightly different type of budget and correspondingly, a Budget Head associated with it. However, broadly speaking, these activities can be classified into three groups: Individuals, Companies, and Governments. These are examined in the next section.
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An individual planning out the monthly spending for himself and his family based on the family income and expenditure. In this case, the Budget Head could be the head of the family, who makes all the financial decisions for the family
A company planning out its business activities for the first quarter of the year based on its expected earnings and expenditures. In this case, the Budget Head could be a financial expert or an industry expert who works for the company.
Depending on the size of the company, the Budget Head might have a varying number of people working under him. For example, a Budget Leader working for a small business might work alone or employ just a handful of people, whereas a Budget Head working for a large business might have an entire department of people working under him.
At a corporation, the Budget Head is usually the leader of the Financial Planning & Analysis team.
A government planning out its expenditures (public spending) and revenue for an entire financial year. This is referred to as the government budget and is based on policies the government intends to follow.
For example, in the United States, Republicans traditionally favor lower government expenditure and lower government revenue (in the form of lower taxes), whereas Democrats traditionally favor higher government expenditure and higher government revenue (in the form of higher taxes). In the case of the government budget, there usually exists an entire government department that works towards framing the budget.
In the US, the Office of Management and Budget (OMB) is responsible for the framing the Annual Budget of the United States. The OMB employs 529 people and itself had a budget of close to $92.8 million in 2011. The current head of the OMB is John Michael (Mick) Mulvaney.
Every decision a company makes is directly or indirectly influenced by its Budget. Thus, it is no surprise that the Budget Head of a company plays a very important role in its success or failure. The Budget Head must have a keen understanding of the company and the industry it operates in. It’s important that the company owners (shareholders) and the Budget Head share the same goals for the company.
It is important to note that while the Budget Head is in charge of framing the budget, he or she might not be in charge of ensuring that the budget is followed. This responsibility can fall on the Budget Holder. In some cases, especially for large companies and governments, the Budget Holder and Budget Head are two different individuals. It is essential for a company to ensure that the Budget Head and Budget Holder have the same goals for the company.
Because a company’s future revenues and expenditures are unknown, the FP&A team has to estimate these values while framing the budget. This is an especially difficult task, as there are almost an infinite number of things that can affect the company and industry in the future. The Budget Head must account for these uncertainties and take steps to minimize the risks for the company while framing the budget.
The Head must work closely with the Budget Holder and other people in charge of the budget’s implementation. A budget that cannot be implemented is useless and serves no purpose.
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