Everything has a purpose, even budgets.

The purpose of management is to act as the decision making agent of the organization as a legal entity.  This is not the same as leadership.  Management, the administration of decisions, has become a science; leadership, the administration of direction, is still an art.

Every day, managers in organizations make decisions that affect the performance of the organization.  When evaluated in hindsight, decisions can be good or bad.  However, over the last one hundred years, a science has evolved to evaluate decisions in foresight.  This science has greatly improved the effectiveness of decision making and the coordination of decisions across the enterprise.  Enter the concept of the “plan”, also known as a body of premade decisions.  A plan has two primary sections, the “action” plan and the “cost of action” plan, which is also known as the “budget”.  Budgets are usually for a specific period of time and expressed in a measure of currency.  The financial budgets should directly tie to the actions related to the work planned.

An organization that does not have a plan or budget will make far more bad decisions than good because managers lack a clear understanding of the cause and effect relationship between the goals of the organization and the work of the organization.

The science of management is not limited to planning and budgeting.  It also includes organizing to the plan and budget (resources); directing to the plan and budget (communication); coordinating to the plan and budget; and controlling to the plan and budget (monitor, evaluate, correct)