Budgeting Presentation - Copy

8/3/2019 Budgeting Presentation - Copy

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GROUP OF MEMBERS:-


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Definition:-A budget is a financial document used to project future

income and expenses. The budgeting process may becarried out by individuals or by companies to estimate

whether the person/company can continue to operate with itsprojected income and expenses.

A budget is a document that translates plans into money


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Meaning:-A budget (from old French bougette, purse) is a list of

all planned expenses and revenues. It is a plan forsaving, borrowing and spending. A budget is animportant concept in microeconomics, which uses abudget line to illustrate the trade-offs between two ormore goods. In other terms, a budget is anorganizational plan stated in monetary terms.


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Importance Of Budgeting:-Why budget?

Why is it important for an organisation, project or

department to have a budget?

The budget is an essential management tool. Without a

budget, you are like a pilot navigating in the dark without

instruments.

1) The budget tells you how much money you need to

carry out your activities.

2) The budget forces you to be rigorous in thinking through theimplications of your activity planning.


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CONTD:3) The budget tells you when you will need certain

amounts of money to carry out your activities.

4) The budget enables you to monitor your income and

expenditure and identify any problems.

5) The budget is a basis for financial

accountability and transparency.

6) You cannot raise money from donors unless you have a

budget.7) Donors use the Budget as a basis for deciding whether what

you are asking for is reasonable and well-planned.


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Principles:-1)Be conservative

2)Consult other people in setting a budget

3)Allow plenty of time

4)Excellence in documentation


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Broad Classification:- CLASSIFICATION ACCORDING TO TIME

1. Long Term Budgets

2. Short term Budgets

CLASSIFICATION ON THE BASIS OF FUNCTION

1. Sales Budget:

2. Production Budget:

3. Purchase Budget


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TYPES OF BUDGET:-All budgets are typically created with the intent to take control of

finances, Create a plan of action, and make adjustments in order

to achieve a financial goal.

1) Sales budget:

2) Production budget:

3) Cash Flow/Cash budget:

4) Marketing budget:

5) Project budget:

6) Revenue budget:

7) Expenditure budget:


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WHO SHOULD BE INVOLVED IN

BUDGETING?Budgeting is a difficult and responsible job. Whoever does the

budgeting must:

1) Understand the values, strategy and

plans of the organisation or project;

2) Understand what it means to be cost effective and costefficient

3) Understand what is involved in generating and raising funds.

To ensure you have all these understandings, it is usually agood idea to have a Small budgeting team. This may onlymean that one person does a draft budget which is thendiscussed and commented on by the team.


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CONTD:The following would normally be involved in the budgeting

process:

1)The Finance Manager and/or Bookkeeper;

2)The Project Manager and/or Director of the organisation ordepartment.

3)Where staff lack confidence to do the budgeting, then Boardmembers can be brought in.

4)Some Boards have a Finance Committee or a Budget Sub-

Committee.It is a good idea to have someone on your Board with financial

skills. S/he can then help the staff with budgeting. The budgetis the business of everyone in the Organisation.


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CONTD:5) At the very least, senior staff should understand the

budget, how it has been drawn up, why it is important, andhow to monitor it.

Where an organisation has branches and/or regions, orSeveral departments, then each branch, region or

department should draw up the budget for its own work. These budgets then need to be consolidated (put together) in

an overall budget for the organisation. Each branch, region ordepartment should be able to see how its budget fits into theoverall budget, and should be able to monitor its budget on amonthly basis.


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ESTIMATING COSTS-CATEGORIESWhen you carry out your plans you will probably need to make

use of a wide range of inputs. Inputs include people,

1) Information,

2) Equipment,

3) Skills.

Careful cost estimation helps in the following

ways:

1) It helps you develop an accurate budget;

2) And It helps you to monitor and control the actual costs ofcarrying out activities.


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CONTD:The costs you need to estimate fall into the following categories:

1) Operational costs

2) Organisational costs

3) Staffing costs

4) Capital costs

These costs include their salaries and any benefits such as

medical aid or pension fund payments for which the organisationis responsible.


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RULES OF BUDGETING:-1)The budget will conform to the goal of a 0 or positive Unres-

erved ending fund balance in all funds by June 30, 2009

2) The budget will contain a deficit reduction of at least $250,000

per year in the General Fund until the General Fund achieves a

positive unreserved ending fund balance

3)The General Fund should reach a target unreserved ending

fund balance of at least 10% of fund requirements by June 30,

2011.

Unreserved ending fund balance includes

two important line items in our budget: inappropriate ending

fund balance and contingency.


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CONTD:4) All operating funds shall have a budgeted contingency

reasonable to the purpose of the particular fund.

5)After June 30, 2011 the General Fund shall maintain an

unreserved ending fund balance of at least 10% of fund

requirements except for extraordinary circumstances.


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CONTD:6)Fund accounting and expense allocation shall reasonably

reflect actual intended resource use as established by City

Council resolution, goal setting, and City management policies.

This mandates transparency in our budget.

7)Special revenue funds shall be created only as needed to

segregate funds due to statutory requirements, ordinances or

contractual commitments. Accounting practice says we should

have the minimum number of funds needed to do our job.

8) Except for extraordinary circumstances, current City services

shall be funded by current resources.


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CONTD:9)The City Budget Officer shall annually present to the

Budget Committee a three year forecast of revenues andpersonnel service expenses.

10)Stretching our planning horizon to three years should makethe effects of dangerous trends such as runaway benefits costs

much more obvious, and allow us to address them.


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BUDGET FORMAT:-Your budget can be prepared using an:

1) ordinary word-processing programme. If you have access toa spreadsheet programme such as Lotus 123 or Excel, and

you know how to use them, this will make your task easier.But it is not essential.

2) Your budget format must make allowance for both theincome and the expenditure to be reflected.

3) 3)Your budget format for an organisational budget shouldallow you to put in projected amounts for about three years,as in the example of the consolidated budget.


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CONTD:RECEIPT: EXPENDITURE:-REVENUE RECEIPT -CHARGED/VOTED

TAX: -CAPITAL REVENUE

- NON-TAX -PLAN/NON PLANNON DEBT CAPITAL:

-LOAN REPAYMENT

-DISINVESTMENT

DEBT:


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ADDITIONS TO YOUR BUDGET:-It is now time to insert actual costs into your budget. If you

have already done the preliminary estimating work this should

not be difficult .

Fill in the amounts you have estimated for each line item in the

budget, across the three years. Use your estimates and be

careful to get the amounts right. Be sure that your working notes

will enable you to justify any amount if you are asked by a donor

or a Board member to do so.

Add up your sub-totals. Check them.

Add up your overall totals. Check them. Calculate whether you

have a surplus or an excess.


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FEEDBACK:-Once you have written the budget, checked your addition and

put in the explanatory notes you think are necessary, it is

time to get feedback.

From whom should you get feedback?

From the people who worked with you on drawing up thebudget.

From others in the project or department.

From your finance department, accountant or bookkeeper. From your Director (unless you are the Director).

From your Board or the Finance Sub-Committee or Budgeting

Sub-Committee of the Board.


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CONTD:-What do you need feedback on? On the categories and line items has everything that needs

to be included been included?

On the notes do they explain everything that needs a specialexplanation?

On the addition is it right?


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FINALISE:-Once you have feedback, make necessary adjustments to the

budget, check your calculations once again, and finalise the

budget. Finalising your budget does not mean filing it away

And never looking at it again. Once the budget is finalised, it is

time to implement it both in terms of generating the necessary

income and carrying out the activities that incur expenses. The

budget gives you a basis for monitoring your work financially and

that is what is dealt with in the next section on monitoring the

budget.


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MONITORING YOUR BUDGET:-The budget is the most important tool you have for monitoring

the finances of your organisation, project or department. You use

the budget to:

Monitor your income and expenditure to see whether or notyou are on target;

Report how you are doing financially to your staff, board and

donors;

Do cash flow projections;Make financial decisions.


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CONTD:-Budget monitoring is used to measure how closely an

organisation is meeting its objectives in terms of its

finances. Comparisons of actual income and expenditure

against the Budgeted income and expenditure need to be

done regularly. To do this, you need to be able to prepare a

variance report. This shows you, month by month, where you are

over spending, under-spending or on target. In order to be able

to do a variance report and in order to be able to do cash flow

projections, you need to break your overall budget up into a

monthly budget.


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MAKING DECISION:-Monitoring the budget is not just something that you do so

that you will know more about your financial performance

as an organisation or a project. You need the information to be

able to take decisions. The cycle looks like this:


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CONTD:The success of the process is dependent on the ability of those

with Management responsibilities to make decisions and

take action. The steps involved are:

1. Prepare your baseline information. (Budget, monthly break

down)

2. Get information on financial performance.

3. Analyse the information and work out what it is telling you.

4 .Look at the potential consequences to your financialstrategy and plans.

5. Draw up a list of options for action.

6 .Get consensus and a mandate to take action.


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BUDGETARY CONTROL METHOD:-a) Budget:

A formal statement of the financial resources set aside for

carrying out specific activities in a given period of time. It

helps to co-ordinate the activities of the organisation. An

example would be an advertising budget or sales force budget.

b) Budgetary control:

A control technique whereby actual results are compared with

budgets. Any differences (variances) are made the responsibility

of key individuals who can either exercise control action or revise

the original budgets.


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BUDGETARY CONTROL

RESPONSIBILITY:-A responsibility centre can be defined as any functional unit

headed by a manager who is responsible for the activities of that

unit.

1) Revenue centres

2) Expense centres

3) Profit centres

4) Investment centres


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UNION BUDGET:- AC restaurants serving liquor and AC hospitals with more than

25 beds under service tax.

Service tax on air travel to be increased.

Customs duty on raw silk reduced from 30 to 5 per cent. Legal services to be expanded to business entities.

20% export duty for iron ore.

Custom duty on Pet Coke and Gypsum to minimized to 2.5%.

No new tax exemption limit for women. Mandatory levy of 10 pct on branded garments.

No change in Central excise duty rate. Base rate on exciseduty raised from 4% to 5%.


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CONTD: Budget estimates for 2011-12 projects- Rs 9,32,440 crore.

Surcharge rate reduced from 7.5 percent to 5 percent fordomestic companies.

Hike in exemption IT limit from Rs 1.6 lakh to Rs 1.8 lakh. New series of coins with new rupee symbol expected.

Simplify tax collection procedure.

1 million UID cards to be distributed per day shortly.

Targeting to reduce deficit to 4.6% for the upcoming fiscalyear.

Plan and Non-Plan expenditure to be increased by 23%.

BPL pension eligibility age limit reduced.


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CONTD:- Rs 1.64 lakh crore for Defence.

Rs 1000 crore to build judicial infrastructure.

Group of ministers to sort out Environmental concerns.

1000 crore for improvising judiciary system.

Rs 8,000 cr to Northeast.

60 schemes for SC/ST to be implemented.

Rs 100 crore for Ladakh.

Rs 150 crore for Jammu.

Pension amount increased for 80 years and above.

Indira Gandhi National Old Age Pension Scheme eligibilityrevised from 65 to 60 years.


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CONTD:- Rs 200 cr grant to IIT Kharagpur.

Rs 20 crore to IIM Calcutta.

50 Crore to muslim universities in different states.

58,000 crore for Bharat Nirman Schemes: FM

State Innovation Council in each state to be set up.

Remuneration of anganwadi workers increased from Rs 1500to Rs 3,000 per month.

Independent debt management office to be established. Rs 1.6 lakh crore to be spent on social projects.


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CONTD:- Current a/c gap a concern due to composition of FX flows: FM

Establishment of national policy on psychotic drugs, narcotics.

Tax free infra bonds worth Rs 30000 cr for PSBs proposed.

15 mega food parks to be set up. Infrastructure spending increased by 23%.

Rs 30K crore tax free bonds to be provided for railways.

Financial assistance to be provide to Bengaluru, Chennai,Kolkata metro projects.

Allocation under Rashtriya Krishi Vikas Yojana to be increasedto Rs 7860 crore.

Promote organic farming.


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CONTD:- Rs 300 cr to cultivate pulses in rain-fed areas;Rs 300 cr for the

promotion of farm product cultivation.

Provide Rs 6000cr for PSU bank recapitalization.

FM: Micro finance companies to be provided with Rs 100 croreequity funds.

Extension of NBS for urea to be analyzed.

Home loan limit increased.

Rs 300 cr for improving pulses production. Rural infrastructure development fund to be raised to 180

billion Rupees for the coming fiscal year.

Grant 1% interest on home loans upto 50 lakhs.


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CONTD:- Rs 5,000 cr to be provided to SIDBI to meet priority lending

targets.

Rs 2000 crore for warehousing facilities.

Rs 2,000 cr for manufacturing facilities. Allocation of Rs 6000 cr for some PSU banks.

Only registered FII's to be associated with Indian MF industry.

Rs 40,000cr to be raised via disinvestment.

GST bill to be introduced in current session.

Extension of NBS to cover urea under review: FM

500 crore proposed for empowering women.

300 crore to be provided to NABARD.


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CONTD:- Average inflation and current account deficit to be minimized

by next year: FM

Strong proposition to fight against corruption.

Pranab seeking Lord Indra's blessings to get good monsoon. Remarkable record for last fiscal year.

Improvise the governance.

Govt. to reconsider ecological concerns.

Tremendous growth in exports-29.4%. Food inflation down from 22.2% to 9.3 %. But still is a major

concern, says FM.

Budget to ensure more transparent economy.


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BUDGETING FORMULAS:-

INTERNAL RATE OF RETURN:-


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BUDGETING FORMULATIONS:-PROFITABILITY INDEX:-

Present value of cash inflowsPI=

Present value of cash outflows


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Conclusion

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