Presupuesto Tradicional Erick Venancio Hernández Cuc 200850571

Traditional Budgeting

Erick Venancio Hernández explains traditional budgeting as a numerical plan for allocating resources to activities. It typically uses the previous year’s budget as a baseline, with adjustments for the next period.

Process and Operating Approach

• Prepare a detailed budget the first time by identifying expected company expenses.
• In later years, reuse the prior budget and make changes as needed.
• Review past errors and results before carrying the budget forward.

Advantages

• Simple and time-saving: Once established, the budget requires less preparation in subsequent years.
• Provides a reference point: Prior-year figures offer a framework for evaluating and adjusting expected spending.
• Can support decentralization: Because the budget is structured and visible, employees at different levels can participate in preparing future budgets.
• Can become part of organizational culture: Repeated use makes the budgeting process familiar and integrated into company routines.

Risks and Recommendations

• Human error and outdated assumptions: Reusing a budget without careful review can carry forward mistakes.
• Weak connection to strategy: Prior-year spending may not reflect new priorities or growth objectives. Keeping spending unchanged can hinder progress toward goals.
• Inaccurate forecasts: Estimates based on historical figures may not match current conditions.
• Recommended practice: Treat the previous budget as a starting point, not an automatic renewal. Review results, correct errors, and make strategic adjustments each year, including changes that support innovation.

Example

The presenter cites government ministries, including education, as an example of traditional budgeting: allocations often remain close to the prior year’s level, with incremental amendments.

Metrics and Targets

No specific financial metrics, KPIs, targets, or timelines are provided beyond budgeting for a subsequent period, typically using the prior year as the baseline.

Presenter: Erick Venancio Hernández (ID 200850571) Source: Mi Lindo Totonicapán