budget 112
TRANSCRIPT
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Practical and Operational Theory of the
Budgeting
Mary Jane M. Asuncion
Don Juan Bo. School
Cuenca District
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What is a budget?
A Plan
A Limit A Schedule
A Reality Check
An Allocation
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Budget a definition
A lanned e!"ession of money# W"ight$% &''( A "actical foundation in costing# Routledge
)o" a defined acti*ity
Sho+s,
-ncome . /!enditu"e
0otal estimated costs
%efined e"iod of time
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Anothe" definition
A budget "ocess is a system of "ules
go*e"ning the decision1making that leads
to a budget2 f"om its fo"mulation2 th"ough
its legislati*e a"o*al2 to its e!ecution$
Karl-Martin !hrhart "oy #ardner J$rgen %on &agen and Claudia Keser Budget
Processes' Theory and !(peri)ental !%idence *o%e)+er ,
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budget hels
ant
*eed
can
Budget
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Why use a budget?
Stay +ithin a limit Cont"ol
)o"ecasting
%elegate
P"io"itise Wants2 3"ganise 4eeds2
Within the "ealm of +hat +e Can
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0o %o+n Budgeting
0o1%o+n Budgeting is the te"m gi*en to a
budgeting "ocess based on estimating
the cost of highe" le*el tasks fi"st and
using these estimates to const"ain theestimates fo" lo+e" le*el tasks
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0o %o+n Budgeting
0akes less time P"omotes ue"1le*el commitment
-n*ol*es no multile*el a"ticiation
Lo+e" management bette" unde"stands+hat ue" management e!ects
P"esented do+n the ladde"
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Bottom 6 Budgeting
Sometimes called 7e"o Based Budgeting
Bottom1u budgeting begins +ith
identifying all the constituent tasks that a"e
in*ol*ed in imlementing a "o8ect and+o"king out the "esou"ces and funding
"e9ui"ed by each
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Bottom 6 Budgeting P"o*ides the oo"tunity to c"eate
o"ganisation le*el budgets by "olling u"o8ect budgets
C"eate cent"alised "o8ect le*el budgets
f"om thei" sub1"o8ect budgets :WBS;
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Bottom u budgeting
0akes mo"e time0akes mo"e time
-n*ol*es c"oss1section of the o"ganisation-n*ol*es c"oss1section of the o"ganisation
P"esented u the ladde"P"esented u the ladde"
Seeks a"ticiation at all le*elsSeeks a"ticiation at all le*els /ncou"ages commitment to the lan/ncou"ages commitment to the lan
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-te"ati*e Budgeting
-te"ati*e to "eeat o" do again
A combination of to1do+n and bottom1u
budget building
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0o %o+n . Bottom 6 Coma"ed
Bottom-up Top-down
- Annual - Multi-year
- Time consuming - Delegated authority
- Ownership of proposals is - Creates joint ownershipof
specic proposals
- Reactive - roactive
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Budgeta"y Cont"ol
0he ability to cont"ol anticiated
e!enditu"es fo" you" "o8ect using a
"o8ect cost budget$
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Budgeta"y Cont"ols
Actual 0"ansactions,
a"e "eco"ded "o8ect costs$
/!amles include labou"2 e!ense "eo"t2
usage and miscellaneous costs$
Commitment 0"ansactions,
a"e anticiated "o8ect costs$/!amles include u"chase re/uisitions
and u"chase o"de"s o" cont"act
commitments$
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)eatu"es of an effecti*e budget
&$ Accu"ate fo"ecasting
=$ Based on o"ganisational goals
>$ -nfo"mation is timely and accu"ate
($ )o"med +ith multile*el inut$ Regula" "e*ie+s a"e built1in
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P"oblems +ith budgeting
0he "ocess is too long
0he"e is a lot of game laying
Business decisions change but the budget
does not
Peole in cha"ge of budget a"e held
accountable in a"eas +he"e they ha*e no
"esonsibility
Alying an a"bit"a"y e"centage toprior
e"iod actual
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Analysing @a"iance
Budget de*iation analysis :*a"iance
analysis; "egula"ly coma"es +hat youe!ected o" lanned to ea"n and send
+ith +hat you actually sent and ea"ned$
@a"iation analysis can hel g"eatly +hendetecting ho+ +ell you"e t"acking you"
lans2 ho+ much to accu"ately budget in
the futu"e2 +he"e the"e might be ucoming"oblems in sending$
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/!amle of a *a"iance "eo"tDate: June 30, 2015
Account: Product Development MONTH TO DATE
AO!NT "E#$ AT!A% &!D'ET (A")ANE *
+A%A")E+ 5025 -,000 3,.50 / ,3.5 / 10
T"A(E% 2 1,500 1,200 / 300 / 25
+!PP%)E+ 5320 500 .00 200 2-$5
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Benefits to checking *a"iance
6nde"stand the "eason fo" the diffe"ences
P"ea"e a mo"e accu"ate budget in thefutu"e
/*aluate budget goals
-solate "oblems -dentify +eak a"eas
oti*ate manage"s
Communicate +ith all le*els
)o"ecast
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Resonse to budget +a"nings
&$ )"eee sending
=$ )"eee acti*ity
>$ Put off unnecessa"y# "o8ects acti*ity
($ Re1scheduleDcost you" "o8ect$ %o+nsie you" "o8ect
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T&A*K 0O1 2O"
34ST!*4*#