Discussion: How do we know when we have chosen the appropriate budgeting approach for an organization

Discussion: How do we know when we have chosen the appropriate budgeting approach for an organization

Discussion: How do we know when we have chosen the appropriate budgeting approach for an organization

I need 50 words for Question 1

Respond to at least two of your classmates’ posts in substantive responses no less than 100 words per response with attention to current realities and applications.

 

 

 

Question 1: How do we know when we have chosen the appropriate budgeting approach for an organization or situation?

 

Forum 1: Budgets age great to use in any busy especially nonprofits and they are planning tools and should be used with planning way ahead of time for best success (Pineno et al., 2006). Two types of budgets that can help in nonprofit organizations are line item budget which is good for nonprofit groups with many units and programs and individual (Dropkin et al., 2007). Line item budgeting is very detailed and will help point out needed changes and information by highlighting important information line by line on the financial document. Line item budgeting is a great way to cover a macro community and mass organizations more than one at a time. The other is cash flow budgeting which keeps on top of the funds and where is being spent daily. This would be my favorite but it’s time-consuming and must be a part of your daily regime. Unlike the line budget, you don’t need to highlight anything, but you do need to check daily where the money is going and being spent. I think the pros and cons are the facts that you need to check every day can get old and especially if you’re on vacation you would need to hire someone to check for you. The pros are you won’t be in a pickle wondering what happened to the money from last week and where it was spent. Believe me, that happens on my husband’s job where the money comes up missing and they called everyone, including him on his furlong (lay off) trying to figure out who ordered what and when.

Resources

Dropkin, M., Halpin, J., & LaTouche, B. (2007).  The budget-building book for nonprofits  (2nd ed.). Jossey-Bass.

 

Pineno, C. J., & Tyree, L. M. (2006). Appropriate Budget Accounts and Activity-based Costing for Decision Making in Non-profit Organizations: A Comparative Study. Competition Forum, 4(2), 354–370.

 

Forum 2: Budget approximates expenses and revenues over a certain period and is usually composed and re-evaluated periodically. Budget can be made for an individual, group of people, a government, a business, or about anything that spends on and makes money. Budgets play an essential part of running a business efficiently and effectively. The budget shows the company’s goals and how the organizational management wants to get and use available resources to achieve those objectives. Non-profitable organizations, companies, and governmental parastatals use various types of budgets to run their operations (Bužinskienė, 2019) Organizations can use budgets to compare and evaluate individual performance in the period the budget is estimated. Budgets are essential to organizations in various ways: managers can plan on days ahead, validates the management’s plans in quantitative terms, motivates the workers to achieve the set goals, and makes the management levels of the organization to think ahead, anticipate results, and have remedies in case of poor results.

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Organizations use different types of budgets in running their operations, and these types have benefits and challenges. Most companies’ common types of budgets include activity-based, incremental, zero-based, and value proposition (Fotakis, D., Gourvès, L., Mathieu, C., & Srivastav, A. 2018).  In the value proposition budget, the management considers these questions.

· Why is the amount included in the budget?

· Does the substance or item create value to the organization, customers, and other stakeholders?

· Does the value of the item outweigh the cost? If not, then there is a reason why the price is accepted?

This type of budgeting has a mindset about ensuring that everything included in the budget has value for the business. This type of budgeting’s main aim is to avoid unwanted expenditures.

A zero-based budget is the commonly used type of budget. It starts with the assumption that all organization departments’ budgets are zero and are rebuilt from zero. The managers of the organization can account for all expenses, and no expenditures are assumed. This type of budgeting is tight and aims to avoid any expenses that are not considered necessary to the company. Zero-based budgeting is the better choice when there is an urgent for cost containment. Besides, the type of budgeting is suitable for addressing discretionary costs rather than critical operating costs.

 

References

Fotakis, D., Gourvès, L., Mathieu, C., & Srivastav, A. (2018). Covering Clients with Types and Budgets. In 29th International Symposium on Algorithms and Computation (ISAAC 2018). Schloss Dagstuhl-Leibniz-Zentrum fuer Informatik.

Bužinskienė, R. (2019). MASTER BUDGET FORMATION IN PRIVATE COMPANIES. Professional Studies: Theory & Practice/Profesines Studijos: Teorija ir Praktika, (21).

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