A budget proposal is an estimate of the future costs, revenues and resources over a specific period of time. Both the business world and almost all levels of government use this type of financial tool. A budget proposal can be tailored to deal with complex financial figures, like those used by the federal government, or it can used with much smaller financial numbers, like a single business project.
To be successful, a budget proposal must quantify a business' objectives and identify how those objectives may be reached. A budget proposal accomplishes this task by creating benchmarks throughout the year, identifying when goals should be met and the level of performance necessary for those benchmarks to be attainable. These benchmarks should be flexible, allowing the business the ability to shift its goals and performance levels easily to compensate for more financially permissible or adverse market conditions.
A budget proposal must also establish parameters for measuring performance with regard to attaining goals and meeting benchmarks. Measuring performance could be something as simple as monthly sales figures for a small business budget proposal or as complex as the national unemployment rate for the federal government's budget proposal. This standard helps the business predict the likelihood of meeting the goals set forth in the budget proposal. A budget proposal with a high standard for measuring performance may have a lower chance of meeting goals than a budget which requires lower performance numbers.
The allocation of funds is another primary concern of a budget proposal, since it details how a company's different departments can spend to accomplish goals and meet the different benchmarks outlined in the proposal. How a budget proposal allocates funds to different departments can be a hotly contested issue in both business and government. A budget proposal may cut services or programs in an effort to eliminate spending and devote funds to more critical business departments or government programs. The inclusion or exclusion of programs can often mean the difference between budget proposal approval or dismissal.
Employing Risk Management
A budget proposal should never plan it goals or expectations with perfect financial conditions in mind. A budget proposal must incorporate strategies for risk management to help a company or division of government meet its goals while avoiding problem areas. Strategies for risk management may include reserving finances to devote more capital to projects requiring more funds or the ability to shut down under-performing divisions with other departments taking on the workload.