CORPORATE GOVERNANCE: BUSINESS BUDGETING

There are several tools and practices that assist in the process of organizing and professionalizing a company, as observed in the last articles Corporate Governance and the Board of Directors, Corporate Governance: Strategic Planning and Corporate Governance: Partner Agreement. Another important tool that accompanies Strategic Planning is the Business Budget. The Business Budget aims to translate into numbers what was established for the short term during Strategic Planning. It details all revenues, investments, costs, and expenses by Cost Center or Business Unit. This tool makes it possible for shareholders and executives to know exactly what the company's financial performance will be, if the premises and goals are achieved. As with Strategic Planning, the Business Budget must be prepared by analyzing the company's internal and external environment. There are many variables that can impact business potential, such as an electoral process. There are methodologies for preparing the Business Budget, such as:Static Budget: focused on a single plan, since by the end of the budget period it will not change. This type of Budget focuses on identifying possible deviations from the objectives and strategies defined in the Strategic Planning.Flexible Budget: widely used in sectors that have representative variable costs in the operation, such as Industries. This type of Budget allows the company to use a range of variation in revenue, costs, and expenses based on the variation in the volume of production or sale.Continuous Budget: is characterized by evaluating long periods, focused on business direction. It seeks to evaluate trend curves, being continuously reviewed, on a monthly, quarterly, or even biannual basis. The purpose of the reviews is to evaluate errors and corrections for subsequent adjustment to the business needs.Incremental Budgeting: consists of the use of historical databases for the preparation of future projections. Based on past figures, it is possible to apply a correction percentage, such as inflation, expected growth rate, etc.Zero-based budgeting: assumes that the company is in its initial period of operation, that is, it does not consider information from the past for its preparation. The revenue, investment, cost, and expense projections are carefully evaluated and justified. In this methodology, it is very important that the objectives and goals are clearly defined so that the investment of resources is evaluated according to their degree of importance. Normally, the Business Budget is prepared in the last quarter of the fiscal year, with projections for the next year. Based on the strategic guidelines defined by the partners, each manager of the Business Units must carefully define the allocation of resources according to the financial capacity of the business. From the Business Budget, it is possible to identify what the need for working capital will be, the financial cycle and whether the company's resources will be sufficient to carry out the strategic projects defined in the Strategic Planning. The company's managers and executives must monitor the main performance indicators (KPIs) month by month, together with the Business Budget, in order to identify possible deviations and points of attention in advance, making preventive decision-making possible. The professionalization of a company is composed of several challenges and complexities. Corporate Governance practices provide organization, security, and profitability for any company. Knowing where you want to go is the first step in a successful trajectory. To make the entrepreneur's dream feasible, the Business Budget is the essential tool.ARTICLE WRITTEN BY PEDRO FENATI — ASSOCIATE OF FC PARTNERSGo to our site: http://www.fcpartners.com.br