Just-in-time budgeting with four methods

I have written extensively about budgets for legal departments, both internal and for matters handled by external counsel (See my post of Sept. 9, 2008: internal budgets with 27 references; and Sept. 12, 2008: internal budgets with 25 references.).

Thus, when an article in the McKinsey Quarterly, 2009, No. 3 at 115, discussed four measures to make the budgeting process more effective, it made sense to pass them along and track down earlier posts here that referred to its ideas.

  1. Scenario planning (See my post of July 9, 2009: scenarios instead of single figures, and decision trees; Nov. 8, 2007: ask for scenarios on budgets; Dec. 9, 2005: scenario thinking.). The article explains the importance of deciding on “trigger events” that would cause a shift from the primary scenario to an alternative.

  2. Zero-based budgeting (See my post of July 6, 2007: an example of zero-based budgeting; Jan. 2, 2009: pros and cons of zero-based budgeting; and March 29, 2009: a step toward reality.). Disaggregating budgets into logical groups of expenditures is part of this technique.

  3. Rolling forecasts (See my post of Jan. 13, 2008: rolling budgets.). Given the duration of some lawsuits, 18-month or 24 month budgets might make sense and lessens the distortion of a focus on an artificial, rigid 12-month period.

  4. Quarterly budgeting (See my post of Jan. 21, 2009: JDS Uniphase and its rolling, quarterly budgets; and March 29, 2009: one technique to boost budget reality.). As the article puts it, albeit in the context of an entire corporation, “abandon annual budgeting and switch to a more tactical quarter-by-quarter process” when times are tumultuous.

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