The Significance of Budget Administration
The process of budgets fulfils important functions in the economy of the nation. It acts as a means to carry out several objectives of the public organization. Some of the important roles of budget in the national economy are:
Prioritization of the allocation of the public resources
Achieving policy goals through prudent financial planning
Establishing accountability regarding the usage of the tax payer’s money
Financial controls also ensure compliance to rules and increase in efficiency
An administrative budget is a financial plan for the administrative side of a business for an accounting period like quarter or year. It includes costs not directly associated with the production of goods and services. Controlling budgets is critical for companies of all sizes, as a large budget can eat up profits and make it difficult for a company to grow. If a company is publicly traded, it also has an obligation to protect shareholders with sensible budgeting, and in some cases companies may have a legal obligation to disclose the administrative budget.
Planning an administrative budget can take weeks or months. The company needs to be able to anticipate costs as accurately as possible, and may factor in issues like inflationary spikes. It lays out goals for the accounting period and may discuss these in the budget. For example, the legal department's budget might expand because a company is preparing a new product that requires legal consultation, and thus the expenditure is justified. If a company cannot explain a sudden jump in administrative expenditures, this could represent communications or efficiency problems within the company's administration.
Accountants, analysts, and others may consult an administrative budget from a prior period for information. Upward creeps in administrative costs tend to become an issue over time and sometimes these budgets become inflated. In these situations, personnel must sit down to determine how to most effectively cut the budget to meet administrative needs while refocusing funds onto other purposes. Regrettably, this could include departmental restructuring and other measures to increase efficiency and cut down on costs associated with administrative activities.
All in all, companies must consider all factors when planning, reviewing or making revisions to an administrative budget during each quarter or year. For instance, are all of the line items in the budget accurate? Is the budget comprehensive accounting for all departmental expenses? Keep in mind that budgets demonstrate how well a company is performing financially and allows key personnel to evaluate company profit and/or loss. It is critical to ensure that solid budgets are implemented and expenditures are tracked accordingly.
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