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A methodical approach to budget Logo cgma

  J. Carlton Collins |   Free |   Feb 2018 |   FM magazine

Budget preparation and control has taken many forms over the years. This article looks at regression-based budgeting using Excel’s regression tools. Initially there is simple example showing how it works with spreadsheets identifying each stage of the process. The example then becomes more complex with eight separate steps identified including conditional formatting, budget variances and review analysis.

Topics covered:
  • Management accounting: Technical: Business planning: Planning, forecasting & budgeting, Advanced

4 Comments/Reflections

Richard Clark

Richard Clark Apr 2019

I think the article would be suitable for individuals learning how to create a budget in a simple business and trying to learn the implications and inter-relationships of forming a budget.

However in a complex organisation the interactions from the wider business, be this Customer Service i.e. complaints/refunds and how smoothly these operations are running, or even significant marketing campaigns on key product lines impact data in an independent way.

I think for simple regression this is great but in this digital day and age there are much more sophisticated means of achieving the same result in a simple way.
Ceinwen Scales

Ceinwen Scales Jan 2019

An interesting article giving an alternative approach to the budgeting process, particularly as we used Excel based budgets.

However, this couldn't be applied in it's entirety to our organisation as our sales budget is built up based on market / project information supplied by the Sales team. The majority of our sales are project based and driven by those projects we 'win' from customers.  Direct costs are also based on that sales data, so this approach simply would not work for that section of the budget. 

It would be worth considering for all other expense budgets and balance sheet budgeting. 

It also highlights areas within Excel that I haven't used before and will definitely explore further
Robert Green

Robert Green Sep 2018

Interesting article, however not really relevant to our organisation as we have moved away from Excel based budgeting processes.
Simon Jeffery

Simon Jeffery Sep 2018

I am aware that Excel 2016 has greatly improved forecasting functionality and this article provides a very helpful explanation of how some of these features work.

I am not sure if I would rely on this totally for our next year budgets as budget figures can change from year to year.

For example, our sales budget is built up from our sales volume forecasts derived from our marketing team, and there can be many variables that influence these forecasts over and above a simple regression analysis e.g. the opering of a new manufacturing plant in China, the US government's imposition of tariffs