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A budget is simply a plan that is used to make a decision that one can spent and how the amount will be spent. A budget can be made by an institution for better planning in order to ensure that it has minimized costs and increased profits. In short a budget is just a kind of collection of predictions. It is not a must for the amount that has been planned how it is going to be spent to happen that way because its main purpose is to ensure that funds have been used as allocated (Brian, 2011). Budget-Building Process refers to the way an organization goes about making its budget. There are several steps that are followed in order to come up with a good budget.
A flexible budget is a budget that can extend, flex or adjust for changes that may occur as volume changes.
- Writing it down.
- Many organizations lack written budget. Writing it down makes the organization to adhere to the allocation of money to various activities and ensures that there is thoroughness in the whole process.
- Deciding who should be involved and when to be involved.
- Those who should be involved in budget making are the Program’s Director together with the executive director. In addition to that, the staff members for each department should also be there
- Establishing an annual timeline.
- The process of budget building should start earlier. This is because some funders who fund organization usually require them at earlier dates. Some even require them two or three months before the beginning of the new fiscal year (John, 1934).
- Listing of specific tasks with their specific responsibility assignments.
- The specific tasks should be presented before the budget departments in time for reference. Though many people in an organization can make a task to happen, one person should be assigned a task so as he or she can be accounted responsible over it.
- Make sure that the budget line item and the financial line item align.
- The two should align so as to ensure that there is effectiveness when comparing between the actuals and the budget.
A static budget is the budget that does not extend, flex, adjust or change regardless of the volume of activity.
A budget cycle is that time frame that a budget covers, or else it is the time between a budget and the next. Budget cycles are used for analysis purposes by companies to predict or forecast what their future expenditures, revenues and costs could be. Budget cycle has four phases which are; preparing the budget, approving the budget, executing the budget and lastly evaluating the budget (Yanwu, 2013).
There are some decision rules and decision problems that may affect the department and the total facility. Decision rules refer to rules or statements that give advices on what should be done under some conditions. A decision problem refers to a problem with a yes or no answer. Decision rules should be followed keenly and in the right way so that an organization may achieve its intended goal. If they are followed well they lead to a success but if not followed to the latter, they lead to a failure.
Brian, C (2011). How to Make a Budget: Get Out of a Debt and Start Saving More Money: Amazon Digital Services Publishers.
John, W (1934). The Flexible Budgets. McGraw Hill Publishers.
Yanwu, Y (2013). Budget Constraints and Optimization in Sponsored Search Auctions (Intelligent Systems): Academic Press Publishers.