A budget could be defined as 'a quantified plan of action relating to a given period of time. For a budget to be useful it must be quantified. For example, it would not be particularly useful for the purposes of planning and control if a budget was set as follows:
'We going to spend as little as possible in running the printing department this year'; or
'We want to produce as many units as we can possibly sell this quarter'.
These are merely vague indicators of intended direction; they are not quantified plans.
They will not provide much assistance in management's task and controlling the organization.
These 'budgets' could perhaps be modified as follows:
'Budgeted revenue expenditure for the printing department this year is $ 80,000'; and 'budgeted production for the quarter is 5,700 units'.
The quantification of the budgets has provided:
a) A definite target for the purpose; and
b) A yardstick for control purposes.
The budget period
You may have noticed that in each of these 'budgets' the time period was different. The first budget was prepared for a year and the second budget was for a quarter. The time period for which a budget is prepared and used is called the budget period. It can be any length so suit management purposes but it is usually 1 year.
The length of time chosen for the type budget period will depend on many factors, including the nature of the organization and the type of expenditure being considered. Each budget period can be subdivided into control period, also of varying lengths, depending on the level of control which management wishes to exercise. The usual length of a control period is 1 month.
Strategic, budgetary and operational planning
It will be useful at this stage to distinguish in broad terms three different types of planning:
Strategic;
Budgetary;
Operational;
These three forms of planning are interrelated. The main distinction between them relates to their time span which may be short term, medium term or long term. The short term for one organization may be the medium or long term for another, depending on the type of activity in which it is involved.
Strategic planning
Strategic planning is concerned with preparing long-term action plans to attain the organization's objectives.
Strategic planning is also known as corporate planning or long-range planning.
Budgetary planning
Budgetary planning is concerned with preparing the short-to medium-term plans of the organization. It will be carried out within framework of the strategic plan. An organization's annual budget could be seen as an interim step towards achieving the long- term or strategic plan.
Operational planning
Operational planning refers to the short-time or day -to -day planning process. It is concerned with planning the utilization of resources and will be carried out within the framework set by the budgetary plan. Each state in the planning process can be seen as an interim step towards achieving the budget for the period.
Operational planning is also known as tactical planning.
Remember that the full benefit of any planning exercise is not realized unless the plan is also used for control purposes. Each of these types of planning should be accompanied by the appropriate control expertise covering the same time span.
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'We going to spend as little as possible in running the printing department this year'; or
'We want to produce as many units as we can possibly sell this quarter'.
These are merely vague indicators of intended direction; they are not quantified plans.
They will not provide much assistance in management's task and controlling the organization.
These 'budgets' could perhaps be modified as follows:
'Budgeted revenue expenditure for the printing department this year is $ 80,000'; and 'budgeted production for the quarter is 5,700 units'.
The quantification of the budgets has provided:
a) A definite target for the purpose; and
b) A yardstick for control purposes.
The budget period
You may have noticed that in each of these 'budgets' the time period was different. The first budget was prepared for a year and the second budget was for a quarter. The time period for which a budget is prepared and used is called the budget period. It can be any length so suit management purposes but it is usually 1 year.
The length of time chosen for the type budget period will depend on many factors, including the nature of the organization and the type of expenditure being considered. Each budget period can be subdivided into control period, also of varying lengths, depending on the level of control which management wishes to exercise. The usual length of a control period is 1 month.
Strategic, budgetary and operational planning
It will be useful at this stage to distinguish in broad terms three different types of planning:
Strategic;
Budgetary;
Operational;
These three forms of planning are interrelated. The main distinction between them relates to their time span which may be short term, medium term or long term. The short term for one organization may be the medium or long term for another, depending on the type of activity in which it is involved.
Strategic planning
Strategic planning is concerned with preparing long-term action plans to attain the organization's objectives.
Strategic planning is also known as corporate planning or long-range planning.
Budgetary planning
Budgetary planning is concerned with preparing the short-to medium-term plans of the organization. It will be carried out within framework of the strategic plan. An organization's annual budget could be seen as an interim step towards achieving the long- term or strategic plan.
Operational planning
Operational planning refers to the short-time or day -to -day planning process. It is concerned with planning the utilization of resources and will be carried out within the framework set by the budgetary plan. Each state in the planning process can be seen as an interim step towards achieving the budget for the period.
Operational planning is also known as tactical planning.
Remember that the full benefit of any planning exercise is not realized unless the plan is also used for control purposes. Each of these types of planning should be accompanied by the appropriate control expertise covering the same time span.
http://www.merchantfundingcashadvance.com
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