Strategic Planning and Budgeting

Strategic Planning and Budgeting

Relationship between strategic planning and budgeting

A business should have a strategic plan and a functional budget. This is because a strategic plan will help in out laying the goals of the business and how these goals can be achieved (Morden, 2016). On the other hand, budgeting is one of the processes of strategic planning which is associated with the money involved to achieve the set objectives and goals of the organization.

Roles of strategic planning

Providing direction for the organization

Strategic planning helps an organization determine what it wants to achieve, how it’s going to achieve it and the benefits of achieving the set purpose (Van Dooren, 2015). Here the organization aims to do the most right thing in order to achieve maximum results. Thus, all the activities that are going to be undertaken are going to be in line with the goals.

Helps in prioritization

A strategic plan helps an organization to be able to determine the most important activities that have to be carried out. The most viable priorities are those that lead to the achievement of the set goals. This is a focal point of any organization.


Helps in learning the organization

Through planning, an organization can learn about its strengths, weaknesses, threats and opportunities (Van Dooren, 2015). Organizational culture is hence followed to the latter since there is enough knowledge about the organization. In departments such as the human resource, there will be simplicity in operations. For example, the Hr Manager can be able to analyze employees and know the changes that can be made to ensure continued success for example training.

Getting better understanding of the outside world

Strategic planning gives a better view of the outside world. The methods used by competitors can be clearly outlaid and services offered can hence be matched with the customers. The hr department can be able to use information about the competitors in that it can also step up to the levels. For instance, knowledge about the motivation methods being used by competitors can be important in learning weaknesses (Snell, 2015).

Helps in spreading information

Strategic planning helps in collection and spreading of information which is helpful to the organization. The HR department can utilize information obtained to achieve its goals such as employee motivation.

Platform for new development

Strategic planning acts as a base for implementation of new ideas obtained. For example the HR department can adopt training methods. This will be helpful in the Long run achievement of goals.

Roles of budgeting

Minimizes wastage of resources

Budgeting helps organizations to prioritize on most important activities to be undertaken therefore wastage of resources is minimized (Storey, 2014). For example in the HR department, the compensation packages are well planned in that they are in line with the available financial resources.

Achievement of goals

Through budgeting, there is reduced wastage hence all the planned activities that are in line with achievement of long term goals are able to be fully supported (Van Dooren, 2015). For example, if the goal of the HR department is achievement of high skilled labor, then training which is essential in obtaining skilled labor is able to be fully funded through a clear budget.

Difference of strategic planning and budgeting

Strategic planning is the prior step to achieving goals of an objectives, which is, setting of intended actions through which a goal is achieved whereas budgeting is the utilization of finances and other resources in order to achieve the goal formulated in the strategic plan

For example in the hr department, the strategic plan can be achieving highly skilled labor. In budgeting, all resources will be aligned in that training can be enhanced in the organization in a way that highly skilled labor can be availed in the organization.

Types of Budgets

Cash budget

Cash budget is used to calculate roughly the amount of cash likely to be used to run an organization. This shows the preparedness of an organization (liquidity).

In the human resource department, a cash budget can be made in order to know the inflows that have been made and outflows such as any amounts that may have been given to the department by the accounting department (inflow) and that spent.


Operating budget

This can be used by the HR department to cater for all the expenses in the human resource department for example in buying stationery or lunch for the employees. May also include additions such as discounts received.

Flexible budget

This is the budget that can be manipulated with the occurrence of activities (Barr, 2018). For example in HR, where training which had not been earlier planned is done, there can be an addition to the budget. A flexible budget leaves room for change that had not been anticipated in the strategic plan.

Program budget

This is used budgeting for a specific program (Snell, 2015). For example, a training program set by the HR department.

Capital expenditure budget

This can be used to plan for long tern activities (Barr, 2018). It may be for a period of three to ten years. The HR department can for instance plan on reward packages every three years for their employees.





Barr, M. J., & McClellan, G. S. (2018). Budgets and financial management in higher education. John Wiley & Sons.

Snell, S. A., Morris, S., & Bohlander, G. W. (2015). Managing human resources. Nelson Education.

Storey, J. (2014). New Perspectives on Human Resource Management (Routledge Revivals). Routledge.

Morden, T. (2016). Principles of strategic management. Routledge.

Van Dooren, W., Bouckaert, G., & Halligan, J. (2015). Performance management in the public sector. Routledge.


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