Budget manual

Budget manual
See also
Spaghetti diagram Baseline schedule Communication plan in project Internal audit MoSCoW technique Top down budgeting Management functions Preparation of project Critical chain method

Budget manual helps employees to create documents required for company budget. Budget manual describes procedures on how to collect data, analyze it, which forms to use, what dates as important, who should accept propositions, etc. Without the budget manual it would be very difficult to create budget documents in large company.

Creation of the budget requires a lot of assumptions about future incomes, costs, opportunities and threats. Every budget, even the best one, is only an approximation. Therefore, it is important to use the same methods of estimation or risk assessment every time. That reduces errors from incompatible assessment methods. If the same methodology is used for several years, the top management knows what are the typical deviations between the budget and real world. That knowledge can be applied to future budgets to make them more accurate.

Contents of Budget Manual

Budget Manual is a document with the following functions:

• Budget control system - short explanations, principles and benefits
• Line of power and responsibility - definition
• Organizational schemes
• Obligations of the budget department, officials preparing the budget
• Schedule of budget preparation
• Reports with results
• How to prepare, write and approve the budget
• Procedures according to which to proceed when approving the budget
• What the budget control procedures look like
• Description of all budgets in the company (Prasad, M., 2000, s. 30)

Benefits of preparing a budget manual

The dvantages budget manual are as follow:

• Maximize profits thanks to a good organization
• As part of the control system, each employee knows what his or her duties are
• Available resources are used in an optimal way
• The established procedures help new employees to enter the workplace
• Budgetary control based on standardized methods and procedures
• Lack of ambiguity (Prasad, M., 2000, s. 31)

Why do we need a budget manual?

Budgets in the company are prepared in advance. They are created in accordance with the guidelines given in the budget manual. Each executive budget has a specific responsibility and functions on the basis of which make up the components of the whole budget. This allows to avoid duplication or overlapping of responsibilities. Budget manuals are prepared for many different departments. The head of each department receives his copy and prepares the budget on the basis of this (Mukherjee P., 2010, s.4-7).

The goals of budget preparation

• Planning - it guarantees the fulfillment of all the provisions and the way it went for the next year,
• Coordination - single parts of the prepared budget give a full picture. Each organization cell is responsible for its own part of the budget,
• Communication - each person needs to know the full picture of the company and communicate with the devout budget preparers. This will allow you to refine the whole,
• Motivation - clear plan further options for action. You can plan many things and projects knowing your budget,
• Control - all tasks are completed according to the plan, budget (Adjei, E., 2015, s.21-23).

Examples of Budget manual

1. Procedures for budgeting:
   • Establish budget objectives and goals
   • Establish budget timelines and deadlines
   • Gather historical data and performance metrics
   • Analyze the data and develop budget forecasts
   • Create a budget document
   • Present the budget document to management for approval
   • Monitor and adjust the budget as needed
2. Forms for budgeting:
   • Budget Request Form
   • Budget Estimate Form
   • Budget Proposal Form
   • Budget Approval Form
   • Budget Adjustment Request Form
3. Guidance for budgeting:
   • Guidelines for creating a budget
   • Best practices for budgeting
   • Tips for budgeting
   • Guidance for budgeting with limited resources
   • Advice for budgeting during uncertain times

Limitations of Budget manual

A budget manual is a valuable resource for creating company budgets but there are some limitations to consider:

• Budgeting is a complex process that involves input from many different departments, and the budget manual cannot account for all of the varying perspectives and needs of each department.
• The manual can only provide general guidelines and cannot account for unique situations that may arise.
• The manual can only offer advice on the best practices for budgeting, but it cannot guarantee that budget decisions will be successful.
• The manual does not provide guidance on how to interpret or use budget data or how to adjust the budget in response to changing conditions.
• The manual cannot predict the future, so it cannot account for unexpected events or changes in the market that may affect the budget.

Other approaches related to Budget manual

One way to create budget documents in a company is to use a budget manual. Other approaches include:

• Budgeting software – this is an automated way to create budget documents. It can save time and money by streamlining the budgeting process.
• Project-based budgeting – this approach focuses on planning and tracking the budget for individual projects or tasks, rather than the entire organization.
• Activity-based budgeting – this approach focuses on budgeting for specific activities that support the organization’s mission, such as marketing and training.
• Zero-based budgeting – this approach requires that all line items in the budget be evaluated and approved each year, rather than simply relying on the previous year’s budget.

In summary, there are various approaches to creating budget documents in a company, including budget manual, budgeting software, project-based budgeting, activity-based budgeting, and zero-based budgeting. Each approach has its own advantages and disadvantages, and it is important to choose the right option in order to create an effective budget.

References

• Adjei, E., (2015). Budget and Budgetary Controls as a tool for the evaluation of management performance. University of Science and technology, s.21-24.
• Mukherjee P., (2010)., Budget Manual.New Delhi, s.4-7.
• Norris, M., (2003)., Budget Manual. The University of Tennessee Institute for Public Service, Knoxville.
• Pangborn, J. (2010). Financial budget manual 2010.
• Prasad, M., Sinha, K., (2000). Principles of Management Accounting. New Delhi, s. 20-34.

Author: Beata Kocyłowska