While traditional budget tends to attach budget based on expense on specific items, PBB is concerned with general event outcomes (Last, 2009 p.2456). The planned and actual performance are both evaluated in terms of efficiency and effectiveness and the assessment used to allocate resources rather than using blind resource allocation system which emphasizes on organizational units and line item expenses. PBB has an objective of improving efficiency and effectiveness in public expenditure by linking allocation of funds to public organizations to their actual and projected performance (Guajardo, 2001 p.457). A basic form of PBB has a design, which ensures that the participating decision makers provide a systematic consideration to the results achieved by the expenditures at various government units when formulating budget on government expenditure. Performance Based Budgeting needs the following essential elements for proper budgetary planning. First it requires a measurable quantity of inputs available for the given project. These include monetary value of all resources ready to be injected in the project. Another requirement is units of output from the project. This involves assessment of the outcome of the project (Hughes, 2012 p.1004). Next is calculation of efficiency. This involves assigning an amount of input to each unit produced in order to get productivity per unit unit or activity. Lastly is analysis of achievement of the predetermined level of performance. The organization must have set goals, which it wants to accomplish; hence, it is necessary to measure the effectiveness of the management system used in terms of objectives achieved. Policy objectives and organizational goal development is the starting point in the PBB process. The achievement of goal and objectives should be reflected using developed performance measures. In the process of budget preparation, the main considerations are, past performance, current performance and projected future performance information (Hood, 2009 p. 456). A detailed decisional analysis is undertaken in order to come up with the best and the most appropriate decision. The final decision should be the best in interlinking resources allocations to the measures, objective and goals. The outcome is a final report financial details and the recommended performance information. The report has a description of how the initiated measures taken influence the strategic plan and the projected result from the project. PBB is effective in Periodic project evaluation as regularcheckup is performed as the project proceeds. Financial information and performance information should be appropriately aligned and coincided during the duty execution in order to enhance efficiency in its implementation. Performances audit is done at the end of the financial period or project to determine the effectiveness of the PBB system used. PBB is beneficial in the sense that it raises accountability of an organization, as it sets targeted outputs that enable the organization to work hard towards achieving. It encourages proper decision-making that are aimed at reducing the gap between the desired level of output and the actual level of output. PBB ensures that government strategic decisions are carefully implemented in terms of financial analysis. It is a tool of trigger to policy makers, customers and service
The commonly known line item budget is associated with showing details of expense on may be office supplies, transport, accrued benefits, wages or salaries. This is the point of distinction between it and Performance Based Budgeting (PBB)…
In this given paper we will mainly concentrate on the areas such as performance indication, product and service costing and budgeting of various kinds along with its disadvantages and process to overcome the same. Through performance indication of the organisation we will be judging the internal as well as external achievement of the institution at present and suggest the necessary tools that would help the organisation in overcoming the hurdles thus faced.
Needless to say, the last thing an organization would like to do in such a scenario would be to waste the funds given them – and along with it, the trust of its stakeholders. An organization without any money is essentially paralyzed, and will not be likely to hold out long before it keels over and dies.
Performance managers have to check if their employees are performing well. Performance management is concerned with improvement, employee development, satisfying the needs and wants of the customer, and also satisfying the stakeholders’ expectations. Performance management is based in the belief that human resource has an unlimited potential.
The research also provides the reasons to use budgeting in an organization and how it could be helpful for the organization to achieve its goals and objectives. Great emphasis is laid on budgeting as it helps the company to evaluate its performance. The research also shows the use of budgeting in different departments of the organization.
As such, a budget is tied to business goals and objectives, current and expected financial capability, and management strategies. In a business environment where there are uncertainties, budgeting is a means of managing risks. Issues in budgeting arise from the influence and confluence of internal and external factors that create anticipated and unanticipated risks.
Budgeting Introduction:Budgeting plays an important role in a business. It is very significant for the reason that it permits the firm to ensure of how much credit it may provides to consumer before it begins to have liquidity troubles. “Cash budget is an opinion of inflow and outflow of the business of an organization for a particular period of time” (Foley 2009).
It generally provides considerable assistance in identifying the dimensions of business functions that need more attention to be upgraded and delivers a rational idea regarding the unnecessary expenses incurred within a particular organization with the motive of preserving financial effectiveness.
Performance Management can be precisely defined as the approach of organisations towards accomplishing the organisational objectives in effectively and smoothly manner. The approach of performance management is concentrated towards affirming the efficiency of several areas of the business which might include the performance of departments or employees or the entire organisation.
Preparing a monthly budget includes recording of all possible incomes in the month, and listing of all fixed expenses like rent, telephone and utilities, and then last is the listing of variable expenses. This way, you can find the
Nearly 3,000 performance indicators are in place-designated- as “key performance measures” with the key function is to facilitate policy makers during deliberations involving budgeting. The Auditor of the
2 pages (500 words)Essay
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