THE BUDGETING

PROCESS
Presented by
Ahimbisibwe Samuel
Date: 8-7-2014

Definition

A budget is a financial and/or

quantitative statement, prepared and
approved prior to the defined period of
time, of the policy to be pursued during
that period for the purpose of attaining a
given objective.
It is a management function which aims
at quantifying the strategic, tactical and
operational plans of an organisation.

Purpose of budgeting

Ensure achievement of the organisations

objectives.
Compels planning ie looking ahead to set
out detailed plans for achieving targets.
Help co-ordinate activities of different
departments towards a common objective.
Facilitate communication to various
responsibility centre managers on what
part they are expected to play.

Purpose of budgeting (continued)

Provides framework for responsibility

accounting ie managers are made
responsible for achievement of certain
targets.
Provides basis of comparing results against
the planned targets.
Provides a means of performance
evaluation.
Motivates employees (managers) to
improve performance.

STRATEGIC PLANNING & BUDGETING

Strategic plan is a long-term plan

It specifies the objectives towards which the
organization directs its future operations.
The hierarchy of objectives is as follows:
Mission: broad purpose and reason of existence
Corporate objectives: Relates to the
organization as a whole. Desired results to be
achieved.
Unit objectives: Specific objectives of the
individual unit.

STRATEGIC PLANNING & BUDGETING

(continued)

Budgeting is concerned with the

implementation of the long-term plan for
the year ahead.
It covers a shorter period and therefore
more precise and detailed.
A strategic plan is broad and only guides
management on what to follow while
making budgets.

Budgeting Approaches
Incremental Budgeting: Involves
basing next years budget on current
years results plus an extra amount for
estimated growth or inflation.
o Advantages:
(i)Easy to prepare (ii) No need of techn.
Staff
o Disadvantages:
Encourages wasteful spending. How?

Budgeting Approaches (continued)

Zero based budgeting (ZBB)

Activities are budgeted for as if they are
being performed for the first time.
Every item of expenditure has to be
justified in terms of cost-benefit analysis
before being icluded in next years budget.
Activities which cost more than they are
worth (in qualitative/quantitative terms)
are dropped.

Budgeting Approaches (continued)

Activity based budgeting (ABB):

An activity is defined as any individual
operation that consumes time, money or other
resources and has a beginning and an end.
ABB involves defining activities that underlie
the financial figures of each function and using
the level of activity to decide how much
resource should be allocated, how well it is
being managed and to explain variances from
budget.

Who should be involved in budgeting?

(Budget process administration)

Budget committee: Consists of departmental

heads. Their role?
Budget officer: appointed by budget committee
to co-ordinate individual budgets into a budget
for the whole organization.
Accounting staff: they assist departmental
heads in preparation of their budgets; provide
figures on past performance; ensure that
budgets are prepared and submitted on time.
Line managers: assist in identifying budget
activities.

Budget time table

This provides a framework in which the

budget should be finalised.
In RMH, this period should be from JuneSept of every year to have budgets
approved by the BOGs ready for
submission to Diocese to be included in
the Diocesan budgets.

Action plan (Strategy)

Follow the program provided

Individual involvement is a must!
Accepting that resources are never
enough in case of budget cuts.

End

Thank you for listening.