Budget Formulation

What is budget formulation and why is it important?

Budget formulation, at its foundation, is the process of choosing and assessing which discretionary investments will be included in a budget submission. It encompasses all aspects of preparing the submission and its supporting analyses, which justify the request.

The budget formulation process is critical because it secures funding, and because it makes a statement throughout the organization as to its priorities for the upcoming year. More specifically, zero-based budgeting (ZBB) can help ensure the budget is aligned with the strategy rather than the past, avoid “automatic” budget increases, and improve operational efficiency.

As we say at Definitive, “The business strategy becomes real when the first investment is made,” so we see the formulation of the budget as the step that enables the achievement of business goals and objectives.

How does Definitive help facilitate this process?

Budget formulation is, by its very nature, a team sport. As such, the process must promote teamwork.

Definitive’s role is to assist with identifying the functions, departments, and cost categories to focus on; establishing benchmarks and conducting comparative analyses to be able to set aggressive, but achievable goals; and finally, establishing clearly defined strategic goals and targets to increase margin.

With the strategic goals and targets in place, Definitive will facilitate: the establishment and weighting of the selection criteria that will be used by the team; the review and evaluation of potential actions and investments; trade-off analyses; and the decision-making process.

Definitive also assists the customer by managing the business process, developing job aids and reports, and providing and maintaining the support tools, such as Definitive Pro™ and Microsoft SharePoint.

For more insights, see our Budget Formulation Case Study


Definitive Pro™ enables the budget formulation team to collaborate anytime, anywhere, using any device. By making it easier to participate, we: bring together representatives from business, technology and finance; promote teamwork; and improve cross-functional insight.


Definitive Pro™ uses the Analytic Hierarchy Process (AHP) to accurately establish the relative importance of the decision criteria, and efficiently score all discretionary investments. The consistent and transparent scoring process yields greater consensus and buy-in than other approaches.


Definitive Pro™ employs the Gurobi optimizer®, a state-of-the-art mathematical programming solver for optimizing the allocation of resources. The Gurobi optimizer quickly identifies the set of investments that maximize the strategic benefit, while satisfying all dependencies and constraints.

Faster and better decisions — Justifiable decision rationale — Historical record of decisions

Definitive Pro™ also powers group decision support for:

  • Business Opportunity Selections
  • Business Partner Selections
  • IT Demand Management
  • Merger & Acquisition Selections
  • Organizational Cost Savings
  • Personnel Selections
  • Product and Feature Selections
  • Requirements Prioritization
  • Risk Assessments
  • Strategic Investment Selections
  • Strategy Development
  • Surveys and Audience Response
  • Vendor Selections

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