Friday, 14 April 2017

Budgeting in different types of organization

In very large organizations, hundreds of managers may be involved in the budgeting process, and the complete budget will probably be a very thick document.

Budgeting when done well is time well spent

This involvement takes a lot of management time but, if the budgeting is done well, it is likely to be time well spent.

This is because the budget will probably be a realistic one, and because after approval the managers should feel committed to it.

Budget is approved - What happens next?

  • When the budget has been approved, individual managers are responsible for their section of it.  the responsibility is like a pyramid.
  • At the base of the pyramid are the most junior managers, supervising a comparatively small section, perhaps involving expenditure only.
  • These junior managers should, however, have some knowledge of the overall budget and objectives.
  • In the middle may be more senior managers and divisional directors, each with a wider area of responsibility for achieving the complete budget objectives.  If everyone else meets their targets they will have an easy job.

Budget must be relevant

Budgets should be designed to meet the needs of a particular organization and its managers.

For example, a large school could well have an expenditure budget of about $4 million.

  • There will be little income and the budgeting emphasis will be on capital expenditure and revenue expenditure.  
  • The main aims will be informed choice and value for money.

Main Principles of Budget for the Large and Small Companies

  • The main principles devoted to the budget of a large company can also be used by a small organization.  
  • There will be fewer managers involved, and less paper, but the same procedures should be followed.

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