TOPIC:

BUDGETING

PRESENTERS:
WAHEED ULLAH
RABIA BIBI
ZIA UD DIN
 0bjectives

At the end of this unit the learners will

be able to:
1. Define budget and budgeting.
2. Discuss purposes of budget.
3. Describe different techniques of
budgeting.
4. Explain types of budgeting.
5. Discuss stages in budgeting.
6. Explain steps of budgeting.
 Budget

An estimate of income and expenditure for a set

period of time.
• A budget (derived from the old French word
meaning purse)

An estimate of costs, revenues, and resources

over a specified period, reflecting a reading of
future financial conditions and goals.
(businessdictionary)
 Budgeting
• Is the process of creating a plan to spend your
money
• Budgeting is simply balancing your expenses
with your income.
• Budgeting is the most important tool of
administration.
 Purpose of Budgets
Budgets has the following purpose:
• Forecast of income and expenditure
• Tool for decision making
• Monitoring business performance
• To assure the most effective and efficient use
of available resources.
• To prioritize policies and objectives.
 Techniques of Budgeting

ZERO BASED BUDGETING:

Zero Based
Budgeting, also called ZBB, is the process of
creating a budget from nothing without using
the prior year’s budget.
• Zero-based budgeting starts from a "zero
base“.
 INCREMENTAL BUDGETING
• The incremental approach to budgeting combines the
costs identified from the previous accounting period
with percentage additions. These percentage additions
are utilized to cover cost increases as a result of
inflation or higher purchases costs.
•
 FIXED BUDGET (STATIC)
• Fixed budgets are budgets that are drafted on
the basis of specific criteria, and do not allow
any room for any changes or variations in
activity at any point during the period of time
covered by those budgets. For businesses, this
means that a fixed budget is drafted for a
calendar or operational year, and is not
amended at any time during that year.
 FLEXABLE BUDGET
• A flexible budget is a budget that adjusts or
flexes for changes in the volume of activity.
The flexible budget is more sophisticated and
useful than a static budget, which remains at
one amount regardless of the volume of
activity.
 TYPES OF BUDGETING
• There are three types of expenditures that the
unit manager is directly involved in, those are
personnel, operating, and capital budgets
 PERSONEL BUDGET
• The largest portion of the budget
expenditures is personnel budget; because
healthcare is labor intensive (not machines
intensive).
• The personnel budget includes actual worked
time (Productive time), and time the
organization pays the employee for not-
working time (Non-productive time).
 OPERATIONAL BUDGET
• It includes daily expenses as the cost of
electricity, repairs and maintenance, and
medical/surgical supplies (as syringes,
catheters…etc ).
 CAPITAL BUDGET
• Capital budgets plan for the purchase of
buildings or major equipment (of long-life
equal or greater than 5 to 7 years) which is
is more expensive than operating supplies.
• Examples of capital budget includes
renovation of a major wing in the hospital,
purchasing equipments (MRI, CT scan)
hospital beds…etc.
 THINGS TO BE BUDGETED
• Salaries for professional, clerical and
domestic staff and drivers
• Stipends for students
• New equipments and repairs
• Linen and other household supplies
• Maintenance /purchasing books, furniture’s
and other items of library.
• Office supplies including stationary
 Stages in Budgeting
For practical purposes, the nursing budget follows
three stages of development:

A) Formulation stage
 Develop objectives and management plans.
 Gather all financial, historical, and statistical data
and distribute to cost center managers.
 Analyze data.
 Review and Enactment stage
• Prepare unit budgets.
• Sent unit budgets for approval.
• Revise and combine into organizational budget.
• Present to budget council.
• Revise and distribute to cost center managers.
 Execution stage:

 Direct and evaluate expenses and receipts.

 Revise budget if indicated.
 Steps in Budgeting
• STEP 1:
Establishment of operational goals and
objectives and policies.
• STEP 2:
Goals must be translated into quantifiable
management objectives for organizational
units. Departmental goals are made.
 Cont….
• STEP 3:
Formal plan for budget preparation and
review including assignment of responsibilities
and timetable is prepared.
• STEP 4:
Departmental budget are revised, and
master budget is prepared.
 Conti….
• STEP5:
Financial feasibility of master budget is tested and
final document is approved and distributed to all
parties involved.

• STEP 6:
Every head of the office required to
prepare budget estimate in respect of salaries of
establishment, and others.eg. Telephone, office
expenses, rent of building etc.
 Importance of Budget
• It is an essential management tool.
• It sets a framework for policy formulation.
• It serves as guide for action in organization.
• It tells how much money is needed to carry out
activities.
• It enables to monitor income and expenditure.
• It is basis for financial accountability and
transparency.
• It helps to measure individual and departmental
productivity as well as profitability.
 References

1.^ "CIMA Official Terminology" (PDF). Archived from the

original (PDF) on 2013-08-10.
2.^ O'Sullivan, Arthur; Sheffrin, Steven M. (2003). Economics:
3.Principles in Action. Upper Saddle River, New Jersey 07458: Pearson
4.Prentice Hall. p. 502. ISBN 0-13-063085-3.
3.^ Cliche, P. (2012). “Budget,” in L. Côté and J.-F. Savard (eds.),
4. Encyclopedic Dictionary of Public Administration,
5. [online], http://www.dictionnaire.enap.ca/Dictionnaire/en/home.aspx