1. BUDGETING
Presented By: Ms. Sujata Walode

2. DEFINITION:
Budgeting is an operational plan, for a definite period
usually a year. Expressed in financial terms andbased
on the expected income andexpenditure.
Or
Budgeting is a concrete precise pictureof the total
operation of an enterprise in monetaryterms.
By: H.M. Donovan

4. PURPOSE OF BUDGETING:
Mechanism for translating fiscal objectivesinto
projected monthly spendingpattern.
Enhances fiscal planning and decisionmaking.
Clearly recognizes controllableand uncontrollablecost
areas.
Offersa useful format forcommunicating fiscal
objectives.
Allows feedback of utilization of budget.
Helps to identify problemareas and facilitates
effective solution.
Provides means for measuring and recording
financial success with objectives of
organization.

6. CHARACTERISTICS OF BUDGETING:
 Should be flexible.
 Should be synthesisof past, presentand future.
 Should be productof jointventureand cooperation of
executive/department head at different level of
management.
 Should be in the form of statistical standard laid down
in the specific numericalterms.
 Should have supportof top management throughout
the period of its planning andimplementation.

8. IMPORTANCE OF BUDGETING:
 Needed forplanning futurecourseof action and
control overall activities in theorganization.
 Facilitates coordinating operation ofvarious
departments andsectors.
 Helps toweigh valuesand make decisionwhen
necessary.

9. PRINCIPALS OF
BUDGETING

10. PRINCIPALS OF BUDGETING:
 Should provide sound financial managementby
focusing on requirement of theorganization.
 Should focuson theobjectivesand policiesof
the organization.
 Should ensure the mosteffectiveuseof financial
and non financial resources.
 Programme activities should be planned inadvance.
 Requires consistentdelegation for framing and
executive budget.
 Should include coordinating efforts of various
departmentsestablishing a frame of reference for
managerial decision and evaluate managerial
performance.

11. CLASSIFICATION OF BUDGETING:
 INCREMENTAL: Based on estimated changesin
presentoperation plusa percentage increase for
inflation, all of which is added topreviousyear budget.
 OPEN ENDED: A financial plan in which each
operating managerpresentsa singlecostestimate for
what is considered optimal activitylevel.
 FIXED CEILING BUDGET: The uppermostspending
limit is set by top executive before the unit and
divisional manager develop budget proposal for the
areas of responsibility.

12.  FLEXIBLE BUDGET: Several financial plans eachfor
different programmeactivity.
 ROLL OVER BUDGET: Forecast programme,
revenuesand expenses fora period greater than ayear,
to accommodate programme larger than annual
budgetcycle.
 PERFORMANCE BUDGET: Allocates functionsnot
divisions (direct nursing care, in service education,
nursing research, qualityimprovement).

13.  PROGRAM BUDGET: Where costarecomputed fora
total program (group total cost for each service
program). Example- MCH, FP, UIP.
 ZERO BASE BUDGETS: Requires nurse manager to
examine, justify each cost of every program both old
and new in every annual budgetpreparation.
 SUNSET BUDGET: Designed to “self destruct”within
a prescribed time period to ensure the cessation of
spend in by a predeterminedate.
 SALES BUDGET: Is starting in budget program,since
sales are a basic activity which gives shapes to other
activities. Compiled in termsof quantityand value.

14.  PRODUCTION BUDGET: Aims at securing the
economical manufacture of production and
maximizing the utilization of productionfacilities.
 REVENUE AND EXPENSE BUDGET: Expressed in
financial terms and take the nature of Performa
income statement for future. Shows the item of profits
and loss.
 CASH BUDGET: Prepared by way of projectingthe
possible cash receipts and payments over budget
period.

16. BUDGETING PROCESS:
 STEP 1: Establishment of operational goalsand
objectives and policies.
 STEP 2: Goals must be translated intoquantifiable
management objectives for organizational units.
Departmental goals aremade.
 STEP 3: Formal plan for budget preparation and
review including assignment of responsibilitiesand
timetable isprepared.

17.  STEP 4: Departmental budget are revised and master
budget isprepared.
 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
budgetestimate in respectof salaries of establishment,
contingent expenditure and others. Example-
Telephone, office expenses, rent of buildingetc.

18. ADVANTAGES OF BUDGETING:
 Fixes accountability, assignment of responsibilityand
authority.
 Encourages managers to makecareful analysis of
operation.
 Weakness is revealed, corrective measurestaken.
 Financial matters can be handled in orderlyfashion.
Activities arebalanced.

19. DISADVANTAGES OF BUDGETING:
 Converts all aspects of organizational performance in
monetaryvalues. Onlyeasy aspectscan beconsidered
and equally important facts such as organizational
development may beignored.
 May becomean end in itself instead of means toend.
Budgetarygoals maysupersedeagency goals.
 Skillsand experiences are required forsuccessful
budgetarycontrol.
 Time consuming andexpensive.

20. THANK YOU