Budget As A Tool For Allocating Resources

Budget Is A Tool For Allocating Resources….says Ngechop Yvonne
By James Achanyi-Fontem, Cameroon Link
Mrs. Ngechop Yvonne Claire Ndifor has described a budget as tool for allocating resources. She was presenting a lecture for budgeting for growth and book keeping to managers of Fine Forest Foundation at the Sickle Cell society on the 2oth November 2008 within the frame work of a Commonwealth Professional Fellowship Grant for 2008.
In her lecture, Mrs. Ngechop Yvonne talked about the objective of a budget, the reason why a budget should aim at the growth of an institution and why book keeping is necessary for evaluation. She explained that a budget should be able to depict what the institution expects to spen and eaqrn over a period of time. She added that a budget could reflect the financial representation of an organization’s mission and strategic goals.
It is a tool for allocating resources and implementing strategic plans and serve as an indicator for evaluating performance. The expenses and revenue of a budget should be traceable, since it is used for evaluating performance and it should reflect the growth of the organization.
To reveal the importance of budgeting, within an organization, Mrs. Ngechop explained that budgeting is about planning, because this is crucial for the production of desired results. The hidden agenda of all budgeting is to save money upfront for both the known and the unknown expenses.
Emphasizing on the benefits of budgeting to an organization, she observed that through budgeting the organization can know what is going on, it is to control, it facilitates organization of activities, it also leads to fluid communication amongst the stakeholders and staff, through it managers can take advantage of opportunities, gain extra time and money.
There are five typical steps in elaborating a budget which include the following
 Setting goals that perform strategic plan
 Establishing objectives for identification of programmes and activities to accomplish set goals.
 Designing programmes that show the method for updating the goals
 Preparing a budget and approving revenues in a quantitative manner as well as expenditure based upon forecast.
 Monitoring progress and comparing actual expenses with budget amounts to establish variances where it exists.
There are three types of budgets which include production budget, sales budget and project budget. But in the case of voluntary and charitable organizations, projects are budgeted separately and a combined budget of the organization emerges. It also observed that in administrating finances, the budget is different from cash flow. When addressing cash flow, we direct our attention to actual expenditure and income. This is considered as cash flow statement. On the other hand, a budget is porepared on an accruals basis. This means that we are focusing the mind on expenses and income without looking at when it occurred.