Budgeting:
Planning Project:
1. Identify obj: a)Mission b)Overall Objectives c)Corp Objectives d) Unit objectives
2. Identify potential strategies:
3. Evaluate strategic options: Consider Suitability, Feasibility, Acceptability
4. Select course of action: Implement strategy with long-term plans
5. Implement the long-term plan in the form of a budget
6. Monitor results
7. Respond to divergence from the plan
Purpose of budgeting:
a)Planning b) Coordination c)Communication d)Motivation e)Control f)Performance evaluation
Conflicting roles: 1)Planning v Motivation: Demanding budgets may be unattainable and not suitable for planning 2)Planning v Performance evaluation: Budget based on past assumption whereas performance eval must compare reality to actual circumstances
Making the budget:
Budget period: 1)Annual too rigid 2)Quarterly better than annual 3)Rolling budget most flexible and provides relevant information but can be confusing for managers due to changing goals
Budget Admin: 1) Budget committee: Appoints budget officer who coordinates. HODs present budgets to com for approval 2)Acc staff: Assist in perparation, do not compile simply advise 3) Budget manual: Describes procedures and objectives of budgeting. Provides deadlines for submission
Budget process: 1)Comm details 2)Restricting factor 3)Sales budget 4)Prod budget 5)Negotiation 6)Coord & review 7)Acceptance 8)Monitoring
Types of budgets:
Computerised budgets: Use fin models to conduct budgeting and sens analysis
Line item budgeting: Focus on nature of spending not purpose
ABB:
Start at output to determine activities required and in turn resources required
Stages: a)Est output b)Est act demand c)Determine resources req d)Est quant of resources req e)Adj capacity of resources to meet supply
Planning programming budgeting systems:
Normal budgeting does not give enough info regarding efficiency or effectiveness of resource usage. PPBS aims to do that
Stages: a)Overall objectives b) Identify programmes to achieve obj c) Do Cost-Ben analysis to allocate resources to most beneficial programmes
Zero-Based Budgeting: Each line item must be justified