How to Calculate a Department's Annual Budget

Calculating your department's budget helps keep the business on track.

Creating a departmental budget means the difference between having control over costs and being caught by surprise sometime during the year and having to make drastic changes. Once an initial budget is determined, it is up to the managerial staff to constantly assess the state of the department and make tweaks if necessary.

Instructions

1. Gather all of your information in one place. Include last year’s budget for reference, as well as any requests for expenditures, such as creating a new position or additional employee training. Having a formal system in place for requesting these expenses will help greatly when it comes time to sit down with the numbers.

2. Assess the necessity for capital expenditures; these are items that go with a building or plant that are expected to last awhile. Determine whether you need a new copy machine or an entirely new set of computers. Be realistic about what is necessary for the most efficient operations of your departments. While computers at each employee’s desk are likely a necessity, a laptop to take home is not.

3. Create your department’s operational budget. Look at the prior year’s expenses and determine whether any categories may need to be created or eliminated. If you added a branch to your department, there may be a whole set of expenses not accounted for in the previous year. On the flip side, if you decided to cancel satellite TV in the break room, there is an expense that can be eliminated. Determine also whether any costs went up and whether you hired or fired any employees. Account for inflation increases as well.

4. Join the capital expenditure and operational expense budget together to form your department’s overall projected budget. Come back to this budget as the fiscal year moves from month to month to access whether you are staying on track. In a report regarding budgeting, The Society for Nonprofit Organizations said this monitoring helps you keep costs under control, motivate employees, plan more effective and ultimately fulfill your goals.

References

• MasterClass Management.com: Business Management Training – How to Create A Budget
• American Council on Education: Preparing the Department Budget
• Society for NonProfit Organizations: Creating a Budget That Works for You