Free Custom «Budget Planning» Essay Paper

Budget planning involves the process of establishing the source of income and accounting for all current and anticipated expenses, with target of attaining financial objectives. They drive of any budget plan is to ensure savings after budgeting for spending. Swart () defines budget as a plan and control mechanism whereby plan is presented in financial terms (p. 27). He also continues to argue that, budget sets certain standard that it ensures they are met in order to achieve given objectives (p. 27). Generally budget can be viewed as a mechanism that is used to control finance expenses.Sometimes budget planning can be quite easy, especially when the institutional approach is assuming the continuation of previous year and also anticipates the budget of the following year will also be the same as that of previous year (Hayes, 2001). However budgeting planning is a very critical process and it should be undertaken carefully. This is because budget normally entails future anticipation of company source of income and means of spending and thus when messed up can affect the operations of the entire organization. There are three approaches which be applied in developing a budget; Top down, Button up, or zero-based budgeting.In Top down approach, top management prepares the budget which is then implemented in the lower department of the organization. This kind of budget clearly shows the performance objectives and anticipations of top management, however it can be unrealistic since they do not involve the input of the very people enforce them. "The cost estimates are passed to lower-level managers, who then break the estimates down into specific work component within the project" (Badiru, 2009, p. 143). Budiru (2009) continues to explain that, the estimates are then given to line managers, supervisors, and the head workers to continue the process until individual costs are attained (p. 143). Therefore we can generally argue that top management provides global budgeting, while functional level worker provides specific budget requirements for project items as Badiru (2009) puts it in p. 143.

 

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In bottom up approach supervisors and middle managers undertakes budget preparation and then forwards it up to the top management for review and approval. This approach in most cases produces accurate budget and can have positive effect on employee morale since employees assume an active role in providing financial input to the budgeting procedure. Budiru (2009) explains that in this approach line worker who is familiar with specific activities are requested to give cost estimates and then make estimates for each activity in terms of labor time, materials, and machine time (p. 143)Zero-based budgeting is the third approach which can be used to draw budget of the organization. In this kind of approach, every manager prepares estimates of his or her proposed expenses for a particular period of time as if they were being performed for the first time. This implies that each activity start from budget base zero. In this kind of approach managers are supposed to take close look at all their expenses and justify them to top management, thus reducing waste.

Our company is composed of the following staffs; 25 RNs, 20 LPNs, and 25 UAPs which should be put into consideration when drawing the budget of the organization. A comprehensive budget is needed which will address and foresee all financial required of all the units. Due to this I will employ Bottom up approach in order to capture all the requirements from department level themselves. This approach is very promising of coming up with the budget which will be very comprehensive and give fair treatment to all departments. All the staffs will be given equal opportunity to present their financial proposals (projections). The top management will evaluate all the projection and proposals for each department and determine which ones deserves to be given priority. However the top management guarantees fair and just treatment in the process of making their judgment on which project to prioritize.It is also essential to determine the needs of the staff and incorporate them or consider them in budgeting process. According to the goals and objectives of our company it is important to have sufficient staff that can attain target productivity. Skills are very important for sure deliverance of employees and thus, employees should be equipped with necessary skills.Due to the above reasons, our company has foreseen the need for an approach and system for evaluating the functional depth within the organization. This approach aims at determining whether there is available staff to fulfill the specified function. This system also determines the skill set, involving the rating and category of how popular an employee is within the organization. The system compares the requirements of the at least one function with skills with a particular employee. The system then determines whether there is existing employee with the required skill as stated in the specific function which needs to be filled. And finally the system determines if there is sufficient staff to capable of performing given function requirement.In conclusion, it is evident that budget planning is very critical within any organization and thus should be given the attention it deserves in order achieve company's objectives. This process should involve consultation among the entire departments in the organization, so that the drawn budget caters for the need of every department. I general we can argue that proper budgeting will enable organization to achieve its goals and remain profitable by reducing expenses and maximizing revenue.