In the world of business, terms with seemingly no relation often end up interacting directly with one another. Such proves the case with the concepts of phases of design and budget accuracy. On the surface of things, little common ground exists between these two ideas. Upon closer examination, however, distinct overlap occurs between the processes of budget accuracy and phases of design.
Phases of Design
Phases of design constitutes the process by which someone creates, or designs, and executes a plan. For instance, phases of design in architecture comprises a five-step process, which the American Institute of Architects identifies as originate, focus, design, build and occupy. In companies, everything from the manufacturing process to capital structure, sales and the company as a whole undergoes phases of design and execution. Any process of design and creation, from engineering to website design, contains phases of design, although not necessarily in the same clearly demarcated way as architecture.
Budget accuracy constitutes a process of comparison. During this process, financial analysts compare the projected budget of a project or portion of a project to the actual expenditure, expressed as a ratio or a percent. For instance, if a company budgets $10 million for a project, and spends $10 million, it exhibits 100 percent budget accuracy. If it spends $11 million, it exhibits 91 percent budget accuracy. Budget accuracy also applies to the relationship between projected profits and actual profits.
Budget accuracy occurs within the process of phases of design. In business, the process of creating a budget for a project occurs within the initial design phases of that project. The actual expenditure becomes clear during the execution phase of the project. Creating budget accuracy ratios allows analysts to measure the financial accuracy and success of a project. The success or failure of a project influences phases of design created for future projects of a similar nature.
When analyzing budget accuracy, accountants or other finance experts can use plans from the phases of design to understand how, where and why a project went off budget. Furthermore, as an investor, you can use phases of design and budget accuracy to measure the merits of investing in a company. For instance, if a company consistently refines its phases of designs and maintains strong budget accuracy, it might make for a sound investment. If a company consistently fails to meet budgets, and doesn’t refine phases of design accordingly, you may not want to invest in the company.
- American Institute of Architects: Five Phases of Design
- “Careers in Architecture”; Blythe Camenson; 2008
- “Computer World”; Management Principles; Michael H Hugos; March 2005
- “Budgeting Basics and Beyond”; Jae K Shim et al; 2009
- Harvard Business Review; The Four Phases of Design Thinking; Warren Berger ; 2010
- Aberdeen Group; Financial Planning and Budgeting; Cindy Jutras; 2008
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