Budgeting Assignment
A company's budget serves as a guideline in planning and committing costs in order to meet tactical and strategic goals. Tactical goals such as providing budgetary costs for daily operations, and strategic objectives that include R&D, production, marketing, and distribution are all part of the budgeting process. Serving as a guideline rather than being set in stone, the budget is a snapshot of manager's "best thinking at the time it is prepared." (Marshall, 2003, p.496) The budget is a method in which to reign-in discretionary spending, and will likely show variances between what costs have been anticipated and what costs are actually incurred.
The Budget Process
Budgetary planning may differ between organizations. Single-period budgets and rolling budgets have methodologies that provide advantages and disadvantages that may make one budget time frame better than another. A single-period may require less time in planning during a fiscal year, but is less accurate than a rolling budget that is continuously planned on a repetitive basis. In either case, budgets are planned in advance in order for a company to operate profitably, and less so to have "actual results equal budgeted results." (p. 496)
The budget process, according to Marshall, is to "develop and communicate" how an organization' economic, industry, and organizational strategies will be effected within the budgeted time frame. (p.497) People within the organization from planners, economists, and managers contribute facets of the strategic budget process in order to meet organizational needs. Upper management then typically approves those budgets. The operating budget is the forecast of activity that encompasses the results of the budget ...
... middle of paper ...
...t allows for forecasts of sales based on historical and growth analysis.
The development (or iteration) of the new system was approved due to successful budgetary results over the previous two years and growth trends expected over the next two years. Additionally, ongoing maintenance on the system as problems began to arise was beginning to negatively influence production performance, and a need to iterate the system to incorporate evolving production goals was identified. The successful budget of the previous years encouraged the approval of replacing the current conversion system with a successor that promises to increase production performance while lowering the fixed costs of salaried programmers needed to maintain it.
References
Marshall, M.H., McManus, W.W., Viele, V.F. (2003). Accounting: What the Numbers Mean. 6th ed. New York: McGraw-Hill Companies.
In this essay, the author
- Explains that the company's budget is a guideline in planning and committing costs in order to meet tactical and strategic goals.
- Explains marshall, mcmanus, viele, v.f. (2003). accounting: what the numbers mean.
- Explains that single-period and rolling budgets have advantages and disadvantages that may make one budget time frame better than another. budgets are planned in advance in order for a company to operate profitably and less so to have "actual results equal budgeted results."
- Explains that the budget process starts with a sales forecast that describes expected revenues from groups of products.
- Explains that there are many assumptions that planners, economists and managers can make regarding the budgetary hierarchy and expected forecasts.
- Explains that a company's budget can be an important method of analyzing its performance. it addresses costs and spending as well as the activities within the organization that increase revenue and profits.
- Explains that standards for controlling activities such as quality, inventory, equipment usage, and service can be developed by using historical or statistical measures.
- Explains that a budget control mechanism analyzes and measures the results or success of budgetary spending to find discrepancies in both the budget and the quality of products and services produced.
- Explains that managers are held accountable for both favorable and unfavorable variances, and how they reflect overall performance in organizational goals.
- Explains that their department approved the major iteration of a system that converts documents from one format to another, and exposes thousands of document resources for consumption through online and cms tools.
Related
- explanatory
- narrative
- opinion
- argumentative
- analytical
- Budget And Budgeting The Budgetexplanatory essayBudget Management Analysis Heidi Loebig HCS/571 June 29, 2015 Debrah Vaughn Budget Management Analysis “A budget is a plan” (Finkler, Kovner, & Jones, 2007, p. 232). The budgeting process consists of two components forecasting the budget and maintaining the budget (Clark, 2005). In the budgeting process, the manager 's responsibilities include accountability, analyzing variances and managing expenses. When the actual budget differs from the forecasted budget, a variance has occurred and needs to be examined further.
In this essay, the author
- Explains the budgeting process, which consists of forecasting and maintaining a budget, and the manager's responsibilities include accountability, analyzing variances and managing expenses.
- Explains the role of the nurse manager in the budgeting process, which is to maintain the actual budget within the forecasted budget.
- Defines variances as the difference between the actual results and the planned results. variance analysis is done for three reasons: to assist with future budget, control costs, and evaluate performance.
- Analyzes how a review of the organization's expense report shows favorable and unfavorable variances.
- Explains the three common types of benchmarking: competitive, collaborative, and cooperative. the goal is to see what competitors are doing well and how to incorporate it into practice.
- Explains that benchmarking is used by large health systems and smaller practices as a tool to identify targets and set goals enabling staff to compare the operation's service, process, and outcomes with those already attaining best practices.
- Explains that budgets are important in planning for the future, and the role of the manager in the budgeting process is complex.
- Explains how applying standards to your practice can improve the care you give. ebsco.clark (2005). improving hospital budgeting and accountability a best practice approach.
1088 wordsRead More - Unit 5 Homeworknarrative essayOperating budgets are budgets that deal mainly with the day-to-day operations of a facility. This may include wages, utilities, rent, and items purchased that have the intent of lasting less than a year (Johnston, n.d). This type budget provides the needed information regarding the cash on hand needed to operate the facility during a fiscal year. Capital expenditure budgets deal with more long term items such as equipment or property. As stated by Johnston (n.d.), it is necessary to have a capital budget for continued growth of the business. You complete this task by purchasing assets that produce an income. Capital expenditure budget have the potential to cover a five- to ten-year period (Baker & Baker, 2014, p.174). Items included in the capital expenditure budget may also include loan interest and bondholder's interest. The operating budget and the capital expenditure budget interact with one another. To demonstrate an example: a healthcare facility purchases a chemistry analyzer for its clinical laboratory. The chemistry analyzer is placed in the capital expenditure budget, but the maintenance for the analyzer is placed in the operational budget. The capital expenditure expense is the chemistry analyzer, but the materials used to maintain the chemistry analyzer are operational expense.
In this essay, the author
- Explains the differences between operating and capital expenditure budgets and how they are used.
- Explains that operating budgets deal with the day-to-day operations of a facility, while capital expenditures cover long-term items such as equipment or property.
- Asks if the analyzer has a maintenance contract and how much time is left in the contract.
- Describes the reasons why their volume has increased since purchasing the current analyzer.
- Asks whether analyzers are more cost efficient with the same vendor or better with another vendor.
- Describes the expected life of the new analyzer and the depreciation schedule.
- Describes the cost of supplies and maintenance for the new analyzer versus the current one.
- Opines that more questions would follow, but this would be a good start to begin the decision-making process of an expensive investment.
- Describes baker, j.j. & r.w. baker's health care finance basic tools for non-financial managers.
- Describes the differences and similarities of capital and operational budgeting in chron.com.
- Explains baker, j. j, and baker r. w. health care finance basic tools for nonfinancial managers.
- Explains that a static budget is not altered as volume changes. a flexible budget addresses different issues such as planning, workloads, and controls and is more time consuming when used.
- Explains that the irr, along with the net present value, are important pieces of the capital budget puzzle for a finance executive.
686 wordsRead More - D1 Unit 5 Benefitsexplanatory essayIf the they are not properly planned and manage , then the organization will ceases to exist in short distance time. While it may seem like having a budget limits creativity and growth, the opposite is true knowing what you have on hand to spend can make it easier to push business boundaries, stretch yourself, and grow creatively. Only when you know what you're obligated to spend, what's forecast in the next business quarters, and what revenue you can rely on can you really make informed financial management
In this essay, the author
- Explains that the review of budget and actual provides feedback information for control purpose. budget directs managers attention to the future.
- Explains that budget allows management to anticipate problem or opportunities on time and deal with them effectively. before companies cut their budget, the company is expected to review its environment, its competitors, target market etc.
- Explains that budget is a motivating factor for the organization. it can be broken down to half-year, quarterly, or monthly.
- Explains that every organization has sources of revenue and expenditure, and if not properly planned and managed, the organization will cease to exist in short distance time. knowing what you have on hand to spend can make it easier to push business boundaries and stretch yourself.
335 wordsRead More - Hrm/531 Week 4explanatory essayAn operational budget is performed in advance before the actual results are generated. When the actual results come, they may vary from this budget. To know if the variance is normal or not, the actual costs be analyzed and explained through the variance. The variance could be the result of a lack of knowledge or a bad estimate of what the expenses or income may have been. It is important to make sure operational costs are up to date because this serves as a reference and if this mistake is repeated, it can hurt profitability in the future. There could be changes in the environment that may increase or decrease revenues or costs and how the operation is overall in the market. Reviewing the budget to project revenues and costs dependent on the current market can help the business receive a better variance. These variances are also calculated to determine if there may be theft in the company. Variance analysis often provides the first indication of possible theft within the company. If inventory is continuously high, an employee may be stealing from the company and should be investigated. A larger, unexpected variance should be analyzed to determine why this is
In this essay, the author
- Explains accounting helps communicate information about the business with information needed to evaluate their financial success. operating costs are important because a business needs to determine how much they can spend based on their allocated funds.
- Explains a flexible budget variance is the difference between actual and expected results for the actual units sold.
- Explains that comparing what was thought to what occurred is a productive way to improve overall business functions to help not repeat the same mistakes.
- Explains that creating an operating budget helps a company project what their costs may be in each year and is then compared to the actual costs. the budget variances are an indicator to determine what investigative action the company may need to take.
549 wordsRead More - Robertwood Johnson University Hospital Case Studyexplanatory essayIt is vital that the operating budget ties in with long-term strategies by planning, setting objects with goals, and forecasting the future. According to Mr. Wright, Robertwood Johnson University Hospital adopted the GE Model of “operation excellence” with long-term strategies with their operating budget. With the ” operations excellence” strategy, the organization has over the years transformed the operating budget by accurately tracking and constantly improving their revenue cycle yearly by setting payment practices to generate revenue to achieve specific financial objectives of greater demand with the maximum revenue margins along with eliminating waste and streamlining the budget by cutting expenses and prioritizing programs
In this essay, the author
- Explains that robertwood johnson university hospital adopted the ge model of "operation excellence" with long-term strategies with their operating budget.
- Explains that with a 3-year program, the organization forecasted what is expected in 2 years, then down to an 1-year plan and integrated it into the budget, while working towards the future and continuously being prepared for the ever-changing landscape of healthcare.
- Explains the importance of strategic critical thinking when implementing a strategy that inheres to "operational excellence."
- Explains that robertwood johnson university hospital has progressed continuously over the years by implementing long-term strategies that made the organization financially successful. setting objectives with goals and having a sense of direction is key to their success with the "operation excellence" strategy.
- Explains that capital management plan entails long-term strategic goals of how to be successful at achieving prospective investments.
- Explains that robertwood johnson university hospital sets long-term strategic goals with a 5-year plan. every department submits capital requests and the project is analyzed, evaluate before making selections.
- Explains that the decision of capital investment projects is a collaborative effort among the ceo, coo, cfo, vp, and directors at robertwood johnson university hospital.
- Explains that healthcare cfo's are committed to overseeing the responsibility of finances for their organization by making budgeting and capital assets decisions.
- Explains that as a cfo, mr. wright had judiciary responsibilities for making sure financial numbers are recorded accurately. robertwood johnson university hospital has auditors reviewing their financial reports to make sure they are legitimate.
- Opines that healthcare organizations must adopt a strategy to stay ahead of their competitors and maintain their patient volume. the triple aim strategy of great quality, great patient experience, and reasonable cost is successful in the healthcare market.
- Explains that robertwood johnson university hospital collaborates with their academic medical school, rutgers, by wanting to know what their competition is doing, so they can stay one step ahead and attract business.
- Opines that the operations excellence strategy needs to be included along with the triple aim strategy to focus on continuous improvement for better outcomes with great quality of service and great patient experience.
- Explains that robertwood johnson university hospital's goal is to provide better care for the patient by allowing patients to have access to healthcare throughout the state through their system.
- Explains that robertwood johnson university hospital is striving for preventive care with less hospitalization and more outpatient settings.
- Opines that healthcare organizations are hurting with the obamacare policy of preventive care for incentives with less hospitalization. robertwood johnson university hospital's successful mergers and partnerships to expand into a larger healthcare system has helped to increase patient volume and revenue.
- Opines that mr. wright sees robertwood johnson university hospital as one of the best medical academic centers and hospital systems in the country, and continues to inher to its successful triple aim strategy of providing great quality and great patient experience at a reasonable cost.
1564 wordsRead More - Importance Of Budgetingexplanatory essayA budget is defined as the quantitative allocation of organizational resources for particular operations and plans for a forthcoming time. They usually serve as the financial blueprint for the company basing on its goals and objectives. Effective budgeting makes significant contributions towards enhancing the efficiency of execution of organizational functions, implying that improper budget can jeopardize the achievement of the goals and objectives of the organization. In addition, excellent budgeting processes should match the business needs of the organization. Also, excellent budgeting functions as a framework for organizational planning and control, whereby the organizational goals and objectives are represented quantitatively in financial
In this essay, the author
- Defines budgeting as the quantitative allocation of organizational resources for particular operations and plans for a forthcoming time.
- Explains that budgeting, just like planning, is future-oriented. organizations usually have variables that they should control, such as financial resources, production methods, human resources and organizational assets.
- Explains that the establishment of goals is an initial step in the planning and budgeting process.
- Explains that performance objectives are measurable, action-oriented, and specific, implying that they have a time dimension. excellent budgeting processes require the organizational management to outline its plans within the common denominator.
- Explains that effective budgeting coordinates all business operations and integrates revenue plans, expenditure plans and financial and asset requirements. coordination and integration facilitate organizational goals and objectives.
- Explains that an effective and systematic budgeting process results in systematic planning. lack of proper documentation implies shortcuts during the planning process.
- Explains that excellent budgeting process facilitates the control function of organizational management. the budget is a performance evaluation tool for the actual financial performance of the organization.
- Explains that effective budgeting facilitates the establishment of realistic goals for the firm in accordance with the business environment. strategic management involves the transformation of organizational resources into elements that can enhance the performance of the organization.
- Argues that an excellent budgeting process is the ability to convert objectives and goal into data.
- Explains that firms need to be selective when allocating the responsibilities of the budgeting processes. they emphasize the importance of cost efficiency and effectiveness.
- Explains that effective implementation of the budget requires the use of responsibility reporting, which facilitates the tracing of all budgetary expenditures to a particular manager within the organization.
- Explains the role of excellent budgeting in transforming organizational goals and objectives into data and the differences between the communication flows in cases of imposed and participative budget.
1727 wordsRead More - Essay On Beyond Budgetingopinion essayQuantitative plans are called budgets. Budgets are prepared to impose cost controls on the activities of an organization (Chenhall, 1986).Budgets are then used to evaluate the performance of the management and budget itself is considered as a standard to evaluate the performance Solomon, 1956). The purpose of the budget is also to implement the strategy of the organization and communicate it to the employees of the organization Rickards (2006). The change in the external environment has led to the change in the budgeting approaches from the initial cash based budgets to the zerio based budgets (Bovaird, 2007).
In this essay, the author
- Opines that controls cannot be introduced into anything that is not desirable in the entity.
- Explains that employees are empowered to capture opportunities in the environment rather than being restricted by budgetary limits.
- Explains that divisional managers are responsible for the performance of their divisions and empowered to make decisions.
- Explains beyond budgeting as the set of guiding principles that, if followed, will enable an organization to manage its performance and decentralize its decision making process without the need for traditional budgets.
- Opines that traditional budgeting approaches consume a lot of time of the companies and are unresponsive to change in external environment.
- Explains that traditional budgets have a positive effect on executive career development, but in reverse condition executives behavior conflicts arise with the organization.
- Opines that businesses should stop using budgets and focus on non-financial information to cope up with the changing environment rather than the financial information. beyond budgeting requires change in culture.
- Explains beyond budgeting is implemented in many organizations and a beyond budgeting round table (bbrt) is designed for its implementation.
- Explains that the interviewees gained market-based knowledge of the applicability of beyond budgeting in pakistan.
- Argues that beyond budgeting techniques can be used to overcome limitations of budgets, such as employee empowerment, decentralized structure, benchmarking, customer focus culture, and competition based targets.
- Concludes that beyond budgeting serves the purpose of organizations in industries where competitive rivalry is high and the environment is subject to dynamic changes.
- Explains that similar studies can be conducted in other geographical contexts to add the applicability of beyond budgeting in such cultures. the study was restricted to the oil industry, hospital industry and the hotel industry.
1789 wordsRead More - Pros And Cons Of Budgetingargumentative essayBudgets has been widely used by a lot of organizations since it was first introduced, because it can helps managers to properly plan and control the business’s resources. Successful control mechanisms as Schick believes are the essential to budgetary development (Gray, Jenkins, and Segsworth, 2002, p.11). However, recently the use of budgets to control organizations has been the subject to criticise and debate (Hansen et al., 2003 cited in Libby and Lindsay, 2010). In this era that full of unpredictable environments has make it even harder for a business to achieve the targets set in the budgets. In fact, European surveys also reported that there has been a growing dissatisfaction among organizations about their budgeting system (Neely et al.,
In this essay, the author
- Evaluates the usefulness of budgeting control in the era of increasing uncertainty events.
- Explains that there are several ways of applying the budgets system that managers may use in an organization, such as coercive and enabling control system. incrementalism is dominated conceptualization, analysis, and description of budgetary models.
- Opines that budgets are an unnecessary tool in a company because managers are rewarded when the planned budget is achieved, which leads to poor quality. fixed-performance contracts may drag down the company's performance.
- Concludes that having budgets in an organization is a great idea, but it is not necessarily true.
- Explains that budgeting is a powerful and useful tool in an organization, considering the fact that many organizations implement it.
- Explains that budgeting is complicated and takes up to six months and 20% of management's time. it is the opposite of top-down management.
1772 wordsRead More - And Johnson Case Studyanalytical essayDuring the year, budget performance was monitored closely. Each week’s and monthly, sales revenue performance figures were sent to Herb Stolzer by Roy Black. Roy Black also sent a monthly management report to Stolzer that included income statement highlights and a summary of key balance sheet figures and ratios. All information was provided with reference to (1) position last month (2) position this month (3) budgeted position.
In this essay, the author
- Explains cordis, inc. prepares a five and ten year plan annually. financial estimates are based on estimated unit sales volume, sales revenue, net income, and return on investment.
- Explains how long-range planning starts at manager level, to get manager's buy-in in the budget. the marketing plan included an estimated pro forma income statement and a one-page narrative description of their strategy.
- Opines that cordis' executive members know the market trend, so if they want to avoid the long extensive budget process, they can. shortening the process of budget reviews allows managers more time to focus on other aspects of operation.
- Explains that johnson & johnson comprises 155 autonomous subsidiaries operating in three healthcare markets. each operating company is responsible for preparing its own plans and strategies.
- Explains how cordis, inc. budget preparation is on based on bottom to top approach, where manager develop budget for their department, initial draft are prepared to present to the executive team and president.
- Explains that the executive committee's budget performance was monitored closely during the year and formally revised on three occasions.
- Analyzes the strengths and weaknesses of cordis's planning process and explains how it is difficult to motivate employees and build interpersonal relationships.
- Opines that managers should consider their long-term planning due to the healthcare and pharmaceutical industry.
- Explains that cordis budget is a participative budget process where everyone employee gets involved and gets affected by the budget.
- Analyzes how the budget process impacts the well-publicized innovation at johnson & johnson (in this case at cordis).
- Explains cordis' philosophy of managing for the company for a long-term. salary and bonus reviews are subjective and qualitative and are intended to reward effort and give special recognition to those who have performed uniquely.
2403 wordsRead More - The Pros and Cons of Participative Budgetingexplanatory essayParticipative Budgeting is the situation in which budgets are designed and set after input from subordinate managers, instead of merely being imposed. The idea behind this sort of budgeting is to assign responsibility to subordinate managers and place a form of personal ownership on the final budget. Nearly two decades of management accounting research has resulted in equivocal findings on the consequences and effects of participative budgeting (Lindquist 1995). Participative budgeting certainly has various advantages, these include the transferral of information from subordinate to superior increased job satisfaction for the subordinate, budgetary responsibility and goal congruence. Its disadvantages include budgetary slack and negative motivation, however it is the conditions in which participative budgeting takes place determines whether the budgeting process is successful. The conditions are dependent on various factors such as the level of participation, level of subordinate influence, the extent to which budgetary slack takes place, volatility, job related information, and the complexity of the budget.
In this essay, the author
- Explains the advantages and disadvantages of participative budgeting, which involves assigning responsibility to subordinate managers and placing a form of personal ownership on the final budget.
- Explains that participatory budgeting has the advantage of transferring information from the subordinate to their superior.
- Explains the disadvantages of subordinate/superior information transferral, namely, that the information supplied by the subordinate may not be entirely accurate; the overstated budget is known as budgetary slack, which allows for unsuspected environmental changes.
- Explains that budgets may be padded out because of the belief that the bigger the budget the more important the manager is perceived to be. participative budgeting may result in slack, but lack of participation may provide subordinates with inadequate resources.
- Explains that participation in budgeting can lead to greater job satisfaction of the subordinate, as they believe that they have influenced the final budget and contributed as a team member.
- Explains the disadvantages of participative budgeting, stating that a subordinate's participation in the budget making process can range from no input (no control), to just voice or opinion (low process control) to vote and decisional role.
- Explains that a subordinate who has voiced their opinion but has had little influence over the final budget is still positive and increases their performance as long as an explanation is given.
- Explains that participatory budgeting can lead to increased job performance through goal congruence and negotiations. the self-imposed budget acts as a system of control.
- Explains that too much participation in budgetary negotiations can lead to vacillation and delay. negotiators' attitudes can affect the outcome.
- Concludes that participative budgeting benefits include a transferral of information, an increase in subordinate morale and job satisfaction, the development of negotiation skills and goal congruence.
1276 wordsRead More