You need to prepare well for an interview to increase your chances of landing the job. This article looks at some of the commonest budget and planning interview questions that you need to know before stepping into an interview room.
We have also come up with conclusive answers to help you craft your responses and win the employer’s trust. Here are the top 25 frequently asked budget and planning interview questions;
1. Could You Please Tell Us the Difference Between a Budget and a Forecast?
As the name suggests, a forecast estimates what the business or project wants to achieve. In contrast, the budget is a quantified expectation of the intended results. Unlike the forecast, the budget has a longer lifespan and is usually updated once a year depending on how frequent it should capture different information. (You can give more differences).
2. What Do You Understand by a Fixed Budget?
A fixed budget does not change throughout the budget period, regardless of the changes in activity levels. It is usually used by several companies that routinely deal with significant variations between the actual and budgeted results. It is not, however, effective when it comes to evaluating the performance of the cost centres.
3. What Are Some of The Advantages of a Flexible Budget?
A flexible budget can be restructured to capture a change in the activity levels. It, therefore, comes in handy when evaluating the performance of different managers. It also acts as a helpful planning tool for senior members of the organization, who uses it to determine the likely financial results at a given activity level.
4. Kindly Enlighten Us What Budgetary Planning Is?
It is the process of coming up with a budget and using it to manage business operations. Its primary purpose is to prevent instances of the organization’s financial results becoming worse than expected. When performing budgetary planning, the first step is to construct a budget, which is done through a number of steps.
5. How Many Budgetary Scenarios Would You Advice Someone to Prepare?
Most companies prepare only one budget scenario, which poses its fair share of disadvantages. Some also prepare two extras, which like the first instance, come with given shortcomings. I would, therefore, advise that one prepares five budgetary scenarios to provide him/ her time to think of a course of action in different types of occurrences and thereby aid proper planning.
6. Please Explain what a Rolling Budget Is and Some of Its Advantages and Disadvantages.
It is a continuously updated budget that adds a new budget period when the most recent one ends. It, therefore, represents an extension of the existing budget, which gives the business an extra year. It allows the organization to revise budget assumptions for the last period, thereby achieving proper planning. However, a rolling budget may give rise to a hardly-achievable budget since it mainly focuses on additions and not revisions.
7. What Do You Understand by Zero-Base Budgeting?
A zero-base budget calls for managers to justify all their budgeted expenditures and is, therefore, more thorough. It departs from the common practice of managers only justifying incremental budgetary changes or result changes from the preceding year. This budgeting method assumes that a manager has an expenditure baseline of zero.
8. Tell Us About Some of The Advantages of Zero-Base Budgeting
Zero-base budgeting has several advantages. It eliminates the possibility of budget inflations as the manager must relate all the expenditures to the activities. It also drives communication among the senior management team on corporate mission and how to achieve it.
Click Here to download 3000+ Project Management Documents: Complete Library of Project Management Templates, Processes, Plans, Checklists, Forms, Tools, Presentation Slides and Infographics. Suitable For All Industries.
This type of budgeting promotes analysis of other alternatives since managers are expected to weigh all the alternatives of performing any activity. It further eliminates activities that do not align with the key ones as the managers are expected to only focus on the critical activities. Lastly, this type of budgeting helps a company focus on its missions as it sparks a discussion among the top management on the company’s missions and how they can be achieved.
9. Mention Some of The Disadvantages of Zero-base Budgeting
The primary disadvantage of this type of budgeting is that it requires an organization to channel lots of efforts to investigate and record the activities of every department in the organization. Most companies cannot manage to do this once a year. Other disadvantages include bureaucracy, gamesmanship as some managers may try to skew their budget reports and add more expenditures under the necessary activities, lack of continuous update and also calls for high levels of training, especially on the required processes.
10. What Do You Understand by Budgetary Slack?
A budgetary slack occurs when a manager deliberately under-estimates the budgeted revenue and over-estimates the expenses. This usually empowers managers to control numbers if the achievement of the budgeted numbers is linked to performance appraisals and bonuses.
This also occurs when the results to be expected in a future period are uncertain, which forces managers to be conservative when coming up with the budget. It mostly happens when coming up with a budget for a new product line or where no historical results exist to help budget preparation.
It may interfere with proper performance since the budget goals are set low.
11. What Is a Budget Variance? What Are Some of Its Causes?
The budget variance is the difference between the budgeted amount and the total amount spent in a given project or fiscal year. It can either be favourable or unfavourable. It is encouraging when the amount spent is lower than the one budgeted, which increases the actual revenue.
The variance in a budget is usually caused by flawed assumptions and improper budgeting, making the baseline used in measuring actual results unreasonable. One of the instances of improper budgeting is using politics to come up with a target.
12. What Do You Understand by Budgetary Control and Some of The Requirements for Successful Implementation?
Budgetary control involves establishing a budget and continuously comparing the actual results with the estimated results. For the successful implementation of budgetary control, you need a budget centre, which is where the budget will be prepared and clearly defined. Other requirements are the budget period, a proper and efficient accounting system, a proper organizational chart, a budget manual and a budget key factor that must be assessed before preparing other functional budgets. The required documents, such as the budget manual, should be well-written and indexed.
13. What Do You Understand by a Cash Budget?
It is a budget prepared under the finance budget. It estimates all the expected cash receipts and cash payments during the budgeted period. It helps an organization to predict and whether they will experience an excess or shortage of funds at any given time. However, before preparing a cash budget, the responsible parties should note the period of the cash budget and the items to be included in the budget.
14. Please Mention Some of The Methods Used to Prepare Cash Budgets
One can prepare a cash budget through three methods. The first is the receipts and payment method, which comes in handy for short term estimations. Here, items are categorized under operations cash flows and non-operation cash flows.
The second is the balance sheet method, which is most suitable for long term estimations, and the last method is the adjusted profits/ loss method which comes in handy for long term estimations.
15. How Do You Set Long-Term Goals for Your Team?
Before working on the team goals, I first consider the overall goals for the entire organization and the role the team plays towards achieving these goals. This gives me the vision to help me come up with reasonable goals.
I also become ambitious and realistic when coming up with team goals. I do not aim too low since that makes the team relax. However, I do not also aim too high but settle on goals that the group find viable.
16. How Do You Inform People About Your Strategic Decisions?
I believe that communication is just as important as form and timing. I will make sure that everyone understands my decisions and the role they play in them. I will communicate the findings during executive meetings before conducting a one-on-one meeting with the lower management representatives. However, if it is an unpopular decision, I mainly focus on the timing and make everyone understand why it had to be done.
17. What Do You Consider the Best Way of Communicating Budget Deadlines?
I believe in clarity and predictability. I always strive to be predictable and transparent when explaining budget details and deadlines. I am of the idea that the organization should inform anybody affected by the budget via email. These emails are accompanied by clear and direct instructions on the needed actions.
Such information should also be sent according to a routine schedule to help in organization and punctuality. I also organize a means that allows department heads and all the stakeholders to review the different models and predictions that affect their job.
18. How Would You Advise Someone to Go About Revising a Budget Plan?
Budget revision is a multiple-step process, whether it is done for an existing or future project. One has to speak with departmental heads and project leads about the goals, necessities and any functional concern. The revision starts with gathering enough information about the budget design and evaluating the current models against the past budgets. One should also ensure that the project reflects the reality on the ground and includes any information regarding different brand perception and consumer trends.
19. What Is Your Experience Dealing with Budgeting Software Programs?
I have been using budgeting software programs ever since my early years as an accountant and even recently as a fiscal analyst. These play an essential role in compiling data and storing information, and comparing different financial reports with earlier predictions. Some of the standard programs that have helped me in my career are Centage and Prophix. I have learnt to navigate most systems.
20. Why Did You Choose This Line of Work?
I have been passionate about Mathematics and solving problems since my childhood. My organizational skills have also been praised. I also rose to become the overall Environmental Club treasurer in high schools, which opened me up to budgeting and planning. Therefore, my foundation convinced me to pursue finance in college, a decision that has proved fruitful.
21. How Do You Feel About Budgetary Slack?
I will take the most controversial route. I believe that budgetary slack helps in financial reporting and making estimations. Coming up with an outline that incorporates slack can help the company think tank to develop ideas to drive operations within a more limited budget.
22. What Is Your Take on Participative Budgeting?
I am a great proponent of participative budgeting. I believe in involving all the parties closely impacted by the budget from as early as its creation stage. Even though my experience and knowledge helps me to develop effective ways of limiting expenditure, listening to the people working within a given budget plays the most critical role in strategizing.
23. How Would You Help an Intern Questioning About the Forecasting Method?
I love helping others, given that I am an aspiring mentor. In such a situation, I’d start by defining what forecasting is before showing them a practical application of the method. Part of my explanation will also cover the difference between straight-line forecasting, regression and moving averages.
24. Why Do You Want to Work with Us?
I can use the experience I have gathered all through my career to better your company. I also need a place that will help me advance further, which your company offers. I believe that all my skills and expertise will be best used in this organization.
25. What Do You Think One Should Consider When Coming Up with An Annual Budget?
One should keep in mind all the company’s spending, revenue, expansion and project goals. Also, one must consider all the projected expenses and data from different departmental heads to determine the proper income projection.
These are some of the commonly asked questions in budget and planning interviews. I hope that they will help you craft unique responses during your interview session.