What Are The Steps in The Budgeting Process in Finance?

Introduction to the steps in the budgeting process on an orange background with an illustration.

A budgeting process is an important tool for companies to help them plan for the future, monitor their performance, and control their costs.

By creating and implementing a budget, a company can set itself up for financial success. Here you will learn what you need to do.

The Different Steps of The Budgeting Process

Here are the seven steps of the budgeting process.

  1. Set expectations with management
  2. Plan Sales
  3. Operational Plan
  4. Plan Resources
  5. Compute Standard costs
  6. Plan Overhead
  7. Transform the budget into Financial Statements

#1: Set Expectations

Understand the expectations from management about:

  • Growth
  • Implementation of the strategy
  • Profitability
  • Lessons learned from the past

#2: Plan Sales

To plan the sales, you need to:

  • Choose the most appropriate method
  • Plan with sufficient details to be able to run an analysis
  • Pay attention to factors impacting changes
  • Ensure the accuracy of phasing
  • Prepare what-if analysis with impact on resources and profitability

#3: Operational Plan

To prepare an operational plan, you need to:

  • Plan production and delivery
  • Plan workload

#4: Plan Resources in the Budgeting Process

To plan the resources, you need to:

  • Plan direct headcounts & capacity
  • Plan material needs
  • Plan investments

#5: Compute Standard Costs

To compute the standard costs, you need to compute the following:

  • Direct labor: hours/unit and hourly rate
  • Material: quantity & price
  • Manufacturing overhead allocation

#6: Plan Overhead

To create a plan overhead, you need:

  • Department budget
  • Allocations of overhead costs

#7: Translate The Budget into Financial Statements

To translate your budget into financial statements, you need to prepare the following:

  • Income Statement
  • Balance Sheet
  • Cash
  • Communicate results and cascade down key figures and action plan

Bonus: Role of Finance

  • Coordination
  • Consistency
  • Documentation
  • Communication of targets and results

Conclusion – The Budgeting Process Is Easy If You Follow The Right Steps

The budgeting process requires time and effort, but it is not hard. Furthermore, if you take the right steps, you will complete it successfully for sure.

An illustration of the budgeting process.

If you want to continue to learn about budgeting & forecasting, you can take my course.

Additionally, the course contains all the practical knowledge you need about analysis, business partnering, and storytelling to accelerate your career as a finance professional.

Share This :

Further Readings:

Free Finance & Productivity Resources:

Free Finance & Productivity Resources

Reach Me

I help Finance professionals grow their skills in Finance, Controlling and FP&A.

If you need help, mentorship and guidance with your career, LET’S CONNECT.

Instant Download

Enter Your Email Address Below to Start Your Download.

You will be subscribed to my newsletter. Unsubscribe at any time.

Unlock Excel Secrets

Enter Your Email Address Below to Start Your Download.

You will be subscribed to my newsletter. Unsubscribe at any time.

Free Download

Get My Ultimate Resource for Finance Professionals.

Grab the Top 10 Free Finance Resources packed in a ZIP file and enhance your expertise and productivity.

Unlock Excel Secrets

Enhance Your Finance Skills with Excel Tips.

Before you leave, grab my top 100 Excel tips designed specifically for finance professionals.

Boost your efficiency and accuracy!


Fill out the form below, and we will be in touch shortly.