Budget Holder (2024)

The manager of a budget process

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Who is a Budget Holder?

The person who is ultimately responsible for ensuring that the budget is followed is known as the Budget Holder. Budget holders are usually the managers and operational directors of companies who are tasked by the owners/shareholders or the board of directors to ensure that the company follows whatever budget is laid out for them.

In most cases, the managers and the operational directors play a major part in the framing of the budget itself. The managers and directors usually play a dual role; they not only help frame the budget but also must make sure that it is followed.

However, in some cases, the managers and operational directors may have no say in the framing of the budget and take it from whoever framed it. In such cases, the manager or operating director acts as a budget holder and must ensure that the budget is followed.

Budget Holder (1)

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Key responsibilities of a budget holder

A Budget Holder for a company needs to ensure that all financial transactions involving the company comply with existing financial rules and regulations governing them. Consider the following example: Company ABC is a manufacturing company and produces a good, X.

The manager (acting as budget holder) of company ABC needs to make sure the procurement and acquisition of raw materials for the production of X follow the financial rules and regulations laid down by the government. These include the wages for all workers of company ABC that should be paid out per the government’s financial rules and regulations.

Large companies usually have multiple departments and divisions and employ numerous workers in each of them. The Budget Holder decides how much of the company’s budget is allocated to each department or division. This allocative role is one of the most important tasks faced by managers and is considered one of the hardest jobs in management.

Consider an extension of the previous example. The manufacture of X by company ABC involves three steps. The company sets up three different departments, each of which is responsible for one step. Each department would like to have as much of the budget as possible.

It is up to the Budget Holder to allocate the budget in a manner that maximizes the profits of the company. (It could be the case that company ABC has different goals for profit maximization, such as total sales maximization. In such a case, it is the Budget Holder’s responsibility to allocate the budget in a way that maximizes the total sales of the company).

Dual role: budget holder vs budget head

For small companies, the budget holder may also be the budget head – the person who is ultimately responsible for the framing of the budget. However, for large companies, the budget head may not be the budget holder.

In such cases, it is important for the company that the budget head and the budget holder share the same goals for the company. For example, a budget head might frame a budget that does not provide adequate funds for the company’s activities. It would then be impossible for the Budget Holder to adequately perform his job.

The reason large companies often employ two different people for the two positions mentioned above is that the framing of the budget and the enforcement of the framed budget may require two very different skill sets, and it is difficult for the company to find a person who possesses both skills. Even if the company wants one person to do both jobs, it simply may not be possible.

At a corporation, the Budget Head is usually the leader of the Financial Planning & Analysis team.

Multiple budget holders

Many large companies employ multiple budget holders who form a committee. This committee is charged with ensuring that the budget is followed. The committee usually consists of managers and directors from the different departments and divisions of the company. The system is more democratic, but may also cause inefficiencies for the company in the form of infighting and indecisiveness.

Even if a company employs only one Budget Holder, he or she does not work alone. Many people, including lawyers, financial experts, industry experts, and consultants, work under the Budget Holder. Ultimately, the Budget Holder is held accountable and is responsible to the Owners/Shareholders.

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Additional Resources

Budget Head

The Role of Financial Planning & Analysis

FP&A Interview Questions

See all career resources

See all FP&A resources

Budget Holder (2024)

FAQs

How to answer what's your budget question? ›

Go ahead and share your budget estimate, even if it's a broad range. Cite a high- and low-end, or give a more specific figure if you're comfortable doing so. If your budget depends on a variety of factors, be open about that. What considerations will impact how much you can spend?

How do you answer a budget experience question? ›

showcase your budget management expertise by providing context on the scale of budgets you've handled. Quantify achievements with specific numbers, emphasizing cost savings and efficiency gains. Highlight proficiency in relevant tools and detail your planning process, addressing challenges transparently.

What is an example of a budget holder? ›

Consider the following example: Company ABC is a manufacturing company and produces a good, X. The manager (acting as budget holder) of company ABC needs to make sure the procurement and acquisition of raw materials for the production of X follow the financial rules and regulations laid down by the government.

What are a budget holder's responsibilities? ›

Budget holders are members of staff who are responsible for the day-to-day management of. the budgets they hold. They are responsible to their budget controller for the management of. that budget. They will normally be personally responsible for authorising expenditure against.

How do you explain budget in an interview? ›

When discussing your budgeting experience, focus on your ability to create and manage budgets effectively. Highlight instances where your budgeting skills led to cost savings, improved financial performance, or optimized resource allocation.

How do you describe budgeting skills? ›

Budgeting skill is the ability to plan and manage money wisely by creating a detailed plan that shows how much money a person earns, how they spend it, and how they can save for future goals.

What is the 50 30 20 rule? ›

The 50-30-20 rule recommends putting 50% of your money toward needs, 30% toward wants, and 20% toward savings.

What are the 4 roles of a budget? ›

A budget can also set you on the right path to achieving your financial goals, spending within your means, saving for retirement, building an emergency fund, and analyzing your spending habits.

What should my budget be? ›

The 50/30/20 approach can be a helpful way to get started with budgeting. It's a simple rule of thumb that suggests you put up to 50% of your after-tax income toward things you need, 30% toward things you want, and 20% toward savings.

What rule can be used to help budget? ›

By following the 50/30/20 budget rule, you will aim to: Spend 50% of your income (after tax) on essential 'needs' Spend 30% on 'wants' Save the remaining 20%.

Why should budget holders have a say in the setting of their budget? ›

4)Annual budgets are usually agreed by negotiation-when budget holders have a say in setting their budgets, they're motivated to achieve them. 5)Budgets should stretch the abilities of the business, but they must be achievable. Unrealistically high income budgets or low expenditure budgets will demotivate staff.

What is the budget accountability process? ›

What is budget accountability? The accountability phase is the final phase of the budget process. This is when the agencies report their actual physical and financial performance.

What does it mean when someone says what's your budget? ›

I'm in sales, this is how it works: I show customer product. They say they want it and ask how much. I ask their budget, ie how much they have decided to spend and how much they can afford. Based on their budget and our relationship, I set my asking price and we negotiate to their final price.

What is my personal budget? ›

A personal budget is a finance plan which allocates future income towards expenses, savings and debt repayment. Personal budgeting requires both creating a doable plan and following it.

What is your best budget? ›

Allow up to 50% of your income for needs, including debt minimums. Leave 30% of your income for wants. Commit 20% of your income to savings and debt repayment beyond minimums. Track and manage your budget through regular check-ins.

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