TOPIC ON: BUDGETING

Budget is defined as a
statement of anticipated
results during a
stipulated period
expressed in financial
and non financial terms.
Three essential steps in
the control process
include establishing
standards, comparing
results with standard
and taking the required
corrective actions. The
budgeting performance
starts when the top
management steps the
strategies and goals for
the organisation.

expressed in financial
and non financial terms.
Three essential steps in
the control process
include establishing
standards, comparing
results with standard
and taking the required
corrective actions. The
budgeting performance
starts when the top
management steps the
strategies and goals for
the organisation.
Budget is defined as a
statement of anticipated
results during a
stipulated period
expressed in financial
and non financial terms.
Three essential steps in
the control process
include establishing
standards, comparing
results with standard
and taking the required
corrective actions. The
budgeting performance
starts when the top
management steps the
strategies and goals for
the organisation.
INTRODUCTION:

Budget is defined as a
statement of anticipated
results during a
stipulated period
expressed in financial
and non financial terms.
Three essential steps in
the control process
include establishing
standards, comparing
results with standard
and taking the required
corrective actions. The
budgeting performance
starts when the top
management steps the
strategies and goals for
the organisation.
Budget is defined as a
statement of anticipated
results during a
stipulated period
expressed in financial
and non financial terms.
Three essential steps in
the control process
include establishing
standards, comparing
results with standard
and taking the required
corrective actions. The
budgeting performance
starts when the top
management steps the
strategies and goals for
the organisation. Budgeting is the
process of translating a plan in quantitative terms, usuallymonetary. Once the major
undertakings of an enterprise have been programmed, they are restated in quantitative
terms in a formal statement called the budget. A budget isa formal statement of a planned
course of action expressed in quantitative terms.
the process of preparation, implementation and the operation of budgets isknown as
budgeting. Budgeting is the formulation of plans for a given future period in numerical
terms. It is method of looking ahead and attempting to solve problems before they arise. It
requires that a business study and evaluate its role in the economic environment with
the object of establishing and achieving stated goals for all levels of the organization.
Business transactions essential for the attainment of these goals are forecast and
summarized in the form of projected financial statements.

DEFINITION:
1. Budgeting is the financial plan of the government for a definite period.
-Taylor
2. Budget can be defined as a numerical statement expressing the plans, policies and
the goals of an organisation for a definite period in future
-Anonymous
3 Budget is the concrete precise picture of the total operation of an enterprise in
monetary terms
-Donovan

PURPOSE OF BUDGETING:
 To provide a quantitative of the plans of the hospital or the institution.
 To evaluate the financial performance in accordance with plans.
 To control the costs.
 To supply the mechanism for translating fiscal objectives into a projected
monthly spending pattern.
 To enhance fiscal planning and decision making.
 To clearly recognize the controllable and uncontrollable cost areas.
 To provide a use format for communicating fiscal objectives.
 To allow feedback of utilisation of money spent.
 To identify the problem areas and facilitate effective solutions.
 To provide a means for measuring and recording the financial success in
accordance with the objectives of the organisation.

TYPES OF BUDGETS:
1. INCREMENTAL BUDGET:
This is based on estimated changes in the present operation, Allowing
for a percentage increase for inflation, all of which is added to the previous
year's budget.

2. PROGRAMME BUDGET:
This is one where costs are computed for entire programme, i.e. group
total costs for each service programme, e.g. Maternal and Child Health Programme
(MCH), Family Planning Programme (FPP), Universal Immunization Programme (UIP), etc.

3. OPEN-ENDED BUDGET:
This is a financial plan in which each operating manager presents a single-cost estimate
for the optimal activity level for each programme in the unit.
Without indicating how the budget should be brought down if appropriate funding
is not available.

4. FLEXIBLE BUDGET:
This comprises several financial plans, each for a different level of
programme activity. It is based on the fact that operating conditions rarely abide by
expectations.

5. REVENUE AND EXPENSE BUDGET:

This is expressed in financial terms and takes the nature of a proforma income
statement for the future. It may be prepared in a detailed form or abstract
statement, reflecting the items of profit and loss under classified headings.

6. ZERO-BASED BUDGETS:
This requires the nurse manager is required to examine and justify each
cost of every programme, both old and new, in every annual budget preparation.

7. SALES BUDGET:
This is the starting point in a budgetary programme, since sales, Activities
give shape to all other activities. Sales budgets are compiled in terms of quality
as well as of value.
 8. ROLLOVER BUDGET:
This one forecasts programmes, revenues and expenses for a period more than a
year, to accommodate programmes that are larger than the annual budget cycle.

9. FIXED-CEILING BUDGET:
This is a financial plan in which the uppermost spending limits are set by the
top executive. The unit and divisional managers develop budget proposals
for their respective areas.

10. PRODUCTION BUDGET:

This is the budget that aims at securing the economical Manufacturing
products and maximizing the utilization of production resources.

11. PERFORMANCE BUDGET:

This is based on functions not divisions, e.g. direct nursing care, in-Service
education, quality enhancement, nursing research.

12. CAPITAL EXPENDITURE BUDGET:

This is prepared for assuring planned timely capital investment the
business to ensure the availability of capital at the right time over a longer
period.

13. CASH BUDGET:

This is prepared by way of projecting the possible cash receipts and payments
over the budget period.
14. SUNSET BUDGET:
This is designed to 'self destruct' within a prescribed time period to ensure
the expenditure is stopped by a predetermined date.,

PRINCIPLES OF BUDGETING:
Budgeting needs to follow certain principles:
1.A budget should provide sound financial management by focusing on the requirement of
the organization.
2. A budget should focus on objectives and policies of the organization. It must flow from
objectives and give realistic expression to the realization of such objectives.
3. A budget should ensure the most effective use of the available financial and nonfinancial
resources.
4. A budget should ensure that programme activities are planned in advance.
5. Utmost care must be taken in fixing targets. A budget should not adopt too high or too
low estimates.
6. The budget period must be appropriate to the nature of the business or service and to the
type of budget.
7. A budget is prepared under the leadership of the administrator or financial officer.
8. While working on the budget a review of the performance of the previous year is
necessary and an evaluation of its adequacy both in quantity and quality.
9. While developing a budget, provision should be made for its flexibility.

STEPS IN BUDGETING:
 STEP1: Establishment of operational goals and objectives and
policies.

 STEP 2: Goals must be translated into quantifiable management

objectives for organizational units. Departmental goals are made.

 STEP 3: Formal plan for budget preparation and review including

assignment of responsibilities and timetable is prepared.

 STEP 4: Departmental budget are revised and master budget is

prepared.
 STEP5: Financial feasibility of master budget is tested and final
document is approved and distributed to all parties involved.

 STEP 6: Every head of the office required to prepare budget estimate in

respect of salaries of establishment, contingent expenditure and others.
Example- Telephone, office expenses, rent of building etc.
ADVANTAGES OF BUDGETING PROCESS:
1. A budget helps plan for detailed programme activities
2. It helps fix accountability
3. It states goals for all units, offers a standard of performance and
stresses the continuous nature of planning.
4. It encourages managers to make a careful analysis of operations and
base decisions after careful considerations.
5. Weaknesses in the organization can be revealed where there are no facilities
available.
6. Staffing, equipment and supply needs can be projected and waste minimized.
7. Financial matters can be handled in an orderly fashion.
8. Agency activities can be coordinated and balanced.
9. Budgets help managers in integrating personnel efforts within the organization towards a
common goal.
10. Budgets act as controlling devices to correct any excessive expenditure to a given
activity at any point of time.
11. Budgets help in just measurement of performance.
12. Budget helps new staff and lower-level managers to see where the organization is
heading and where they fit in the organization.

DISADVANTAGES OF BUDGETING:
1. A budget may become an end in itself instead of the means to achieve an end.
2. Budgetary goals may curb agency goals and gain autocratic control of the
organization.
3. Over budgeting is a big danger which may render a budget becomes meaningless and
expensive.
4. Forecasting is required but is uncertain, as budgetary control is subject to human
judgment, interpretation and evaluation.
S. Skill and experience are essential for successful budgetary control.
6. Budgetary planning is expensive and time consuming.

Definitions:
1. Budgeting is the financial plan of the government for a definite period.
- Taylor
2. Budget can be defined as a numerical statement expressing the plans, policies and
the goals of an organisation for a definite period in future
- Anonymous
3. Budget is the concrete precise picture of the total operation of an enterprise in
monetary terms
- Donovan