Administration of the Budgetary Process

Administration of the Budgetary Process
The budgetary process has to be administered effectively in terms of initial planning, final approval and subsequent monitoring of implementation. A budget committee is usually formed to manage each stage of the budgetary process. The accounting staff will have a close involvement. The budget preparation procedures will need to be set out in a manual which is available to all participants. A continuing cycle evolves in which initial budgets are prepared, negotiations take place with line managers, the initial budgets are revised, the final budget is accepted and, later on, there is a review of actual and budgeted performance. The cycle then starts over again.

The budget committee
To implement the strategy decisions, a budget committee will be formed, comprising the senior managers who are responsible for designing the strategy. The budget committee receives the initial budgets from each functional manager. If the initial budget is based on unrealistic targets, then the functional manager will be asked to modify the budget within the organisation’s overall targets. There is a motivational aspect of budget preparation, so it is important that the functional manager understands the need for revising the budget within the organisation’s strategy. Budget negotiation can be quite a delicate process.

The accounting department
The staff of the accounting department will work with operations managers to initiate the preparation of budgets and will advise and assist in the practical aspects of budget preparation. They should have the knowledge and experience to provide advice to line managers on the preparation of budgets. The accounting department will have the computer facilities to prepare and co-ordinate the budget preparation process. The accounting staff must involve themselves with the operations team in the budget exercise and must understand the commercial issues. They may have to offer challenges to the operations