Introduction
The author of this paper works for a for profit professional university. The university uses a typical fiscal year date of July to July. The budget cycle though is on going with continuous monitoring of the overall operational budget and unit budgets throughout the year. The process of building the next year’s budget starts in the spring with guidelines/perimeters given by the chief financial office. Proposed budgets are then submitted, reviewed, and adjusted to fit the universities forecasted revenue. The closing of the budgets is a curious time period where accounts can be frozen due to revenue shortcomings or units can be encouraged to make large expenditures do to surpluses. Most recently the institution has seen a deficient in the overall operational budget for the university due to declining revenue. A key problem with closing the budget during these years of revenue shortcomings
…show more content…
This practice allows for a freeze in spending, accounting for the loss in revenue. The result of this is non-essential items (i.e. new technology, travel, company meals, extra) are not purchased. At the university in question there is a habit of budget managers disregarding requests to slow expenditures, thus not reduce spending at the level set by the finance department. Therefore the practice of closing the budget forces a stop of non-essential expenditures. The problem comes with providing continues programing to our students. When it comes to student activities these expenditures are not essential to the function of the university, but are important to the well being of the students. As an institution that is solely dependent on the revenue generated from student tuition, student satisfaction is a priority. When annual student events or activities can’t happen because of a budget closing early this has a negative effect on student
Budgets are the financial requirements and consequences of plans. Budgets are made with specific goals in mind. Budgets can be used to lower living expenses, increase savings, or to save for a purpose such as: education or retirement. Budgeting is a process that involves these actions: defining goals, gathering information, forming expectations, reconciling goals and data, monitoring goals and variances, adjusting budgets, and redefining goals.
“Fiscal policy involves varying the intended expenditure and revenue of the Australian government so as to assist in attaining the government’s economic objectives.” (Bulmer, 2014) One of the main influences on the fiscal policy in Australia is the budget; which is an estimate of income and expenditure for a set period of time. A famous economist called John Maynard Keynes discovered a remarkable economic principle called Keynesian Economics. Keynesian economics is a theory of total spending in the economy (called aggregate demand) and its effects on output and inflation. (Binder, 2008) This economic principle is continuously used in Australian economics and helps governments and economics make economically based decisions.
Budgets 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.,
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 use of budgets in the healthcare sector have several benefits and serve several purposes. For example, budgets set the performance agenda for the year ahead through estimation of revenues and expenditures (Byrne, 2007). Additionally, a budget allows a health care organization (HCO) to provide a forecast of income and expenditure or profitability, can be used as a tool for decision making, and as a means to monitor business performance (Leo Issac, n.d.). Forecasting allows HCOs to predict whether a profit will be made or not (Leo Issac, n.d.). Moreover, budgets aid in decision making or determining if a potential expenditure has been planned for or not (Leo Issac, n.d.). Lastly, budgeting allows HCOs to
Brewer, Garrison, and Noreen (2010) and Ross (2008) had defined the meaning of budget which is a detailed plan that shows the resources will be allocated and used during a specific time period. It is a detailed plan for the future allocation of money in measurable terms with the formal formatting, which also known as financial plan. The purpose of budgeting is to help the company to balance the capital with the expenditure and the budgeting is being prepared and being used as a benchmark to avoid the exceeding expenditure. However, based on the explaining by Goodluck (2011) budgeting also may refer to the non-financial resources that include
However, these reports can also be created to inform other organizational employees and the public. With a wide range of potential audiences, budget analysts must emphasize accuracy, thorough research and evaluation, and regulatory compliance. Due to a variety of audiences, effective budget analysts are able to communicate complicated decisions in layman terms (“Budget analyst,” n.d.). Ultimately, the work of a budget analyst may result in the success or failure of an
Quantitative 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).
This type of budget planning has both advantages and disadvantages, but in the long run, if planned and properly conducted, will prove to be a more valuable way of preparing a budget. Businesses who have adopted the zero-based budget approach generally reported improvement and either saved money, improved services, or both (LaFaive, 2003). Zero-based budgeting carries many advantages. An important advantage of zero-based budgeting is it will cause a manager or department head to be more cognoscent of the financial requirements of their department. This will eliminate unnecessary spending in areas that have been overlooked by traditional budgets.
Everyone has their own political leaning and that leaning comes from one’s opinion about the Government. Peoples’ opinions are formed by what the parties say they will and will not do, the amounts they want spend and what they want to save. In macroeconomic terms, what the government spends is known as fiscal policy. Fiscal policy is the use of taxation and government spending for the purposes of stimulating or slowing down growth in an economy. Fiscal policy can be used for expansionary reasons, which is aimed at growing the economy and increasing employment, or contractionary which is intended to slow the growth of an economy. Expansionary fiscal policy features increased government spending and decreases in the tax rates as where contractionary policy focuses on lowering government spending and increasing tax rates. It must be understood that fiscal policy is meant to help the economy, although some negative results may arise.
This is a budgeting process that requires managers to prepare budgets each period from ground zero for all the operations. Each period budget can feed off previous approved period budget. Under this method every activity must be justified and cost explained that generates revenue for a company. All costs are justified each time a budget is completed.
Line item budgeting categorizes various expenses and places them in list format on a document for budgetary purposes. This type of budgeting is considered the heartbeat of budgeting due to the systematic method by which it controls revenue and expenses, this is made evident when Tyer and Willand (1992), pointed out “Statutory or administrative controls could be imposed on the transfer of funds from one-line item to another, or between broad categories of expenditure.” According to Schick (1971), “line item budgets were attractive to legislative officials because they did not focus explicit attention on substantive policy issues or choices.”
In regards to school finance, the ultimate goal of school administrators is to provide all students with the most cost effective, comprehensive education that meets all federal, state, and local requirements and that reflects the values and beliefs within the community. This means that it is an expectation for schools to equip all students equally with the best possible educational opportunities that a community is willing to furnish. However, to accomplish this, school administrators must be able to sustain school programs throughout various economic periods.
It requires an adequate and sound organizational structure, that is, there must be a definite assignment of responsibility for each function of the enterprise. Budgeting compels all the members of management, from the top to bottom to participate in the establishment of goals and plans. Budgeting compels departmental managers to make plans in harmony with the other departments and of the entire enterprise. Budgeting helps the management to put down in figures what is necessary for a satisfactory performance. Budgeting helps the management to plan for the most economical use of labor, material and capital. Budgeting tends to remove the cloud of uncertainty that exists in many organizations, especially among lower levels of management, relative to basic policies and objectives. Budgeting promotes an understanding among members of management of their co-workers' problems. Budgeting force management to give adequate attention to the effects of general business conditions. Budgeting aids in obtaining bank credit as banks commonly require a projection of future operations and cash flows to support
Yes, I was being honest when I was charting my spending habits because I haven’t done a budget that lasted a week before, and I wanted to get an estimate of how much I spend in a week. It was an interesting task to be aware of how much I was actually spending by having real numbers to look at in an organized spreadsheet. The spreadsheet itself was very simple and direct which made it easier to analyze. By lying about my spending habits, this assignment would have been counterproductive since I would have been avoiding facing the truth about how much I spent that week. Instead of being dishonest and trying to avoid that amount of money I spent, I was honest when I was charting my expenses since I wanted to get an actual estimate, even if this