DB4-Replies Hi Mozella,
Thanks for sharing details in regards to the baseline budget. In any business, a budget is a very important part of planning. The baseline budget can be determined by many factors. According to the article, "Basing Budget Baselines", the author stated, "A baseline can aid policymakers in determining what should be on the legislative agenda by helping to define and prioritize policy problems that need to be addressed" (Kamin, 2015). The amount of spending also plays a role in the success of the project. In some cases, the project manager have to reevaluate the project plan if the budget is at stack. In some cases, people believe that the process of setting the budget baseline seems a little complicated, but goals
A budget plan is the most effective way to keep the business and its finances on track. It gives you the opportunity to review the business’ performance and any factors that are affecting or may affect your business. Also to manage your money more effectively, allocate appropriate resources, monitor performance, meet planned objectives and plan for the future.
For example interest rates, the cost of raw materials including fuel, the number of sales or orders that we make and in turn all of these rely on other factors. The best therefore that can be done when developing a budget is to look at all the factors that are likely to affect the budget and decide how to take account of each one. If there is a previous budget (last year or last month) then it is sensible to look at how this has been achieved or not as the case may be, and what factors affected the outcome. If we are looking at monthly budgets it might be a better comparison to look at the same month twelve months ago as well as the previous months. The more factors we take into consideration when estimating a budget, the more accurate our budget will be.
According to Zaccagnini & White (2017) developing a budget is an important step in project management. The budget determines personal, materials, and financial resources that are available for the achievement of the project (Roussel et al.,2016). An estimate of the necessary budget as well as the individual’s time to be invested in the project is necessary so the organization can approve these resources needed for the success of the project. For this project,
There are different types of budgeting that businesses typically use and those include Operating budgets, Capital Budgets and there are many subtypes that exist because a budget can also be created for special events, the recruitment and retention of new staff, and to manage the advertising expenses and return on investments for a business (Demand Media, 1999-2012). According to Demand Media (1999-2012), "An operating budget outlines the total operating expenses and income for the organization, typically for the period of a fiscal year. Capital budgets evaluate the investments and assets of the business, and a cash budget shows the predicted cash flow in and out of the business over a period of time” (para.2 ). According to the Cost-Benefit Analysis (2012), “Capital budgeting has at its core the tool of cost-benefit analysis; it merely extends the basic form into a multi-period analysis, with consideration of the time value of money. In this context, a new product, venture, or investment is evaluated on a start-to-finish basis, with care taken to capture all the impacts on the company, both cost and benefits. When these inputs and outputs are quantified by year, they can then be discounted to present value to determine the net present value of the opportunity at the time of the decision” ("Cost-Benefit Analysis," 2012).
Staying on budget is one of the key factors that will play a significant role in ensuring the success and the completion of the project in a timely manner. In addition, budgeting will allow this project to develop a spending plan which will ensure that we do not exceed the $3,000 dollars allotted for the project. Furthermore, by having a budget plan in place, we are on the path to setting and meeting our financial goals.
The budget process for each year begins by examining how much was spent each month. For each month, a budget is created for the following year. Staff members at the unit level impact the budget with supply usage.
In outlining a budget there are two phases that must be determined to create a budget, an operating phase and a financial phase. “Developing a new operating budget starts with examining budgets from previous years and identifying what components are going to change, by how much and if any new components need to be added or existing ones reduced or cut” (Budget Challenges, 2012). In the first phase of the budget it needs to be determined how much money is going to be needed to operate the day to day activities of the business.
Budgets are necessary in every business whether the business is small or large. A small business that has just of 2 people working will set themselves budget for example; for this financial year the business needs to spend £60k and want £80k of a turnover. Large businesses will also do the similar however as it's a large business they rather spend in millions and not in thousands or hundreds so in order for them to receive cheaper priced units and have a larger turnover. It is essential for a business to set themselves budgets so for any other investments or back up they have some additional
A budget is an instrument used to help managers ensure that the resources used effectively and proficiently toward the goals of an organization. A budget projection can be made on a yearly base depending on previous year or existing one. They can further be broken down quarterly or monthly depending on it use. Generating a budget is complex undertaking, and for a budget to be effective the organization ought to follow it strictly. However, no matter how closely a business follows their guidelines there will always be some form of variances. The organization should expect a few variances and be able to work these discrepancies in any budget
A revenue budget can only be effective after you have created the statistical budget. This budget will use all of the data and information from the statistical budget. “Revenue budgets are forecasts of a company’s sales revenues and expenditures, including capital-related expenditures. It is essential that you establish whether you possess enough financial means to conduct operations, grow your business and ultimately make a profit. Without this planning, your company's future may be uncertain as you may not know how much money you’re taking in or spending.” (What Is
Project baseline definition: This step will determine which areas of the project will be audited. It will establish the standards for which to measure the area on. Verify that the performance established by management is meeting expectations.
No project is done perfect the first time; there is always a chance an error that needs correction or new ideas to make it perfect. So it is with creating and monitoring a budget. Having an accommodation for changes in a budget is a very good practice. It helps managers and budget developers respond to competitive setbacks or breakthrough more precisely and quick; by using available resources for good opportunities or correction of errors.
Strategic planning is done with the 3 to 5-year roadmap, identifying the opportunities to improve the top line (business /premium growth) or bottom line (expense savings) Operational efficiency. The projects are identified through Strategic Planning and are then funded through the annual budgeting cycle. These annual budgets are based on the business performance for the prior years. Large strategic projects, also known as Level 1 initiatives, which span multiple years, are funded separately through a Corporate Budget.
Budgeting is essential in the development of any major business project. Without a well-planned budget, projects can fall apart and be left incomplete. Budgeting is no simple process, however, as budgets can be fixed or flexible, depending upon the industry in which the project is implemented and based on the availability of additional income sources. Nonetheless, budgeting provides a number of different advantages that a project manager should consider.
The 20’s century saw the use of budget involve due to a change in the environment. Indeed the control of output used to be obtained by the dissemination of tasks and so traditional budgets were very much highlighted, with a significant top-down influence. As an example of the importance of budget in the 1970’s IBM had about 3,000 people involved in their budgetary process. During the same period, the oil crisis brought concerns about rising in costs and led to the introduction of zero-based budgeting (ZBB), which can lower cost by avoiding blanket increases or decreases to a prior period’s budget. The increase in business uncertainties was in discrepancy with the stifling effect of fixed plans, promoting the use of rolling budgets. The 1990’s saw the growing influence of shareholders and steered the focus on a budget that included a wider view of organisation results, answering the investment community for quarterly updates on results and expectations (Bill Ryan, 2005). Budgets then started being used as a communication tool between the financial community and the organisation, allowing the corporation to be integrated in the capital market. Moreover companies started using flexible budgets rather than static budgets as nowadays various levels of activities can be observed in most organisations. The use of flexible budgets then enables firms to be consistent with their new environment and the market.