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Thread:

Budget

Post:

Budget

Author:

Angel Cuffie

Posted Date:

June 8, 2021 5:59 PM

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Published

Budget cycles are essential as they help control costs, making it easier for the finance department to prepare the necessary reports. In addition, the budget cycles are important to allow the management to respond to the problems or the opportunities disclosed during the regular reviews. At the end of every budgeting cycle, the accounting can carry out a budget variance analysis to compare the budget performance to the projected values. This helps to give the management more detailed financial information for effective decision-making. Some of the decisions include the cash flow management in different quarters of the business season. The budgetary planning techniques allow for creating a spending plan and ensuring enough money to meet the organization's needs. Therefore, the business cycle and budgetary planning techniques are essential in ensuring proper government management or organization management. 

Value of Budget Cycle Comment by Hy: See comments.

            The budget cycle is a continuous process that starts with revenue estimation. This is the process carried out by the executive to estimate the levels of revenues collected through taxes to budget for them (Alesina & Paradisi, 2017). This process ensures that there is transparency and that the entire process is understood. Then, the finance director or the budget director carries out the method of revenue estimation. The budget cycle also includes the budget call process, where different recommendations are made on the goals that should be laid down and achieved within a given budget cycle. This process aims to ensure that there is equity in the sharing of the government resources collected in the form of taxes (Mandon & Cazals, 2019). It also helps in developing a presentation form that is used in the budgeting process. Finally, the budget formulation process is meant to reflect on the past goals, the formulated goals, and those intended to be achieved in the future and work on reconciling the difference (Aaskoven, 2018). This is a valuable step because it helps the government continue focusing on greater interest and allocating more resources. 

            The process of budget hearings is meant to bring different parties together to air their views on whether they think the set goals are suitable for the country's development. The budget hearings can include the executive and the public who recommend the necessary changes (Aaskoven, 2018). This process ensures that the budget is well formulated as per the current needs of society. However, before implementing a budget, the legislature must pass it (Priyono & Wagner, 2018). This is a form of control to ensure the executive does not have all the powers in the development and the implementation of the budgetary process. Therefore, the legislature must agree on the executive's suggestions on how to spend the revenue estimates. The execution process follows after the legislature adopts the budget (Priyono & Wagner, 2018). This is followed by some amendments to meet the set goals and objectives by the end of the fiscal year. 

Value of Budgetary Planning Techniques Comment by Hy: See comments.

            All the budgetary planning techniques are relevant and important for use by the governments. However, theyThey enhance the ability to analyze the trends and establish the short-term and long-term revenues and the government's expenditure over time (Ivanova et al., 2017). The management identifies the key business drivers to make the series of business plans that model the necessary things for the government and how they would be affected by the variables. Therefore, through the budgetary planning techniques, the short-term and long-term revenues generatedgenerated, and the expenditure are established, including some of the determinants driving them. The fiscal planning tools go a step further to include financial modeling. This is the process where they create a summary of the expenses and the earnings (Kwarteng, 2018). The developed equations in the financial models are effective in carrying out financial forecasting. This is important, especially in understanding the changes necessary to prevent having deficits or stalling some goals. Forecasting is carried out using different techniques. They include simple regression, multiple, linear, and non-linear extrapolation (Kwarteng, 2018). This process aims to ensure the government can see into the future and understand how the developed budget will be affected by some determinants. 

From a biblical perspective, it is important that one takes time to do budgeting to ensure that there are enough resources for all tasks involved in a project (Luke 14:28-30, ESV). Having a budget is in line with the biblical requirement of making prior planning and developing measures to ensure there is proper performance. The budgetary planning techniques are a form of driver-based planning. The Bible says, “prepare your work outside; get everything ready for yourself in the field, and after that build your house” (Proverbs 24:27, ESV). This process helps the government understand the shortcomings in its spending and the areas that can be enhanced to increase revenue collection.

 

 

References

Aaskoven, L. (2018). Polity age and political budget cycles: Evidence from a Danish municipal reform. European Journal of Political Economy, 52, 75-84.  https://www.sciencedirect.com/science/article/abs/pii/S0176268016302403

Afful-Dadzie, A., Afful-Dadzie, E., Awudu, I., &Banuro, J. K. (2017). Power generation capacity planning under budget constraints in developing countries. Applied energy, 188, 71-82.  https://www.sciencedirect.com/science/article/abs/pii/S0306261916317214

Alesina, A., &Paradisi, M. (2017). Political budget cycles: Evidence from Italian cities. Economics & Politics, 29(2), 157-177.  https://onlinelibrary.wiley.com/doi/abs/10.1111/ecpo.12091

Ivanova, O. B., Bogoslavtseva, L. V., Karepina, O. I., &Kostoglodova, E. D. (2017). Providing the budget transparency and state projects efficiency monitoring in Russia.  https://www.um.edu.mt/library/oar/handle/123456789/28648

Kwarteng, A. (2018). The impact of budgetary planning on resource allocation: evidence from a developing country. African Journal of Economic and Management Studies.  https://www.emerald.com/insight/content/doi/10.1108/AJEMS-03-2017-0056/full/html

Mandon, P., &Cazals, A. (2019). Political budget cycles: Manipulation by leaders versus manipulation by researchers? Evidence from a meta‐regression analysis. Journal of Economic Surveys, 33(1), 274-308.  https://onlinelibrary.wiley.com/doi/abs/10.1111/joes.12263

Priyono, S., & Wagner, N. (2018). Political Budget Cycles At Subnational Level: Evidence From The Indonesian Simultaneous Regional Election In 2015. JurnalPerencanaan Pembangunan: The Indonesian Journal of Development Planning, 2(3), 203-218.  https://journal.bappenas.go.id/index.php/jpp/article/view/38