Thesis on "Budget Planning"

Thesis 8 pages (2314 words) Sources: 8 Style: APA

[EXCERPT] . . . .

Budget Planning

Abstract

The following pages will focus on providing a general image of the

issue of budgeting, from the state's perspective, on the one hand, and from

a corporate perspective, on the other hand. The purpose of the essay is

mainly to create a parallel between the most important aspects that affect

the two types of budget: the federal and the corporate one.

In the attempt to clarify the similarities and differences between the

federal budget and the corporate one, theoretical research has been the

most important tool. The comparison between the two types of budget is

intended to help readers to easier understand how budgets are designed,

their purpose, and their importance.

The approach of the subject is a general one. The reason for using a

general approach relies on the fact that the space destined for the essay

recommends such a general approach to a matter of larger interest, rather

than a more specific issue.

Outline

As mentioned above, the essay is intended as a parallel between

aspects concerning both the federal and the corporate budget. The approach

is a general one, in order to cover as many issues as possible, rather than

focusing on a smaller number of specific issues. Also, a general approach

to the subject is able to provide a clearer image of the similarities and

differences between the two types of budgets.

1. Government Budget. This section is intended as an introduction in

the most important issues that surround the matter of federal budget. The

section brings into discussion the three dimensions of the government

budget: the economic, political, and technical one. The section clearly

makes the distinction between the federal and the corporate budget that is

characterized by the economic dimension only. Another distinction between

the two types of budgets noted in this section is represented by the

sources of the governmental revenues, on the one hand, and corporate,

private revenues, on the other hand.

2. Budget Development Process. This section aims at describing the

actual process that leads to the creation of the budget. The subject is

also approached in a general manner, given the fact that specific technical

information might prove to not be useful for readers. The most important

decision makers involved in the budget development process in the case of

both the federal and the corporate budget are listed in this section.

3. Budget Principles. This is one of the most important sections in

the essay. Its importance is granted by the fact that the entire budgeting

process, whether one refers to the federal budget or the corporate one,

relies on these principles. The matter is even of greater importance since

the most important federal budgeting principles have been expressed by the

President. The stated principles also provide a general image on the

central administration's preoccupation for what are considered to be the

most important public domains: education and health care. The two systems

must be reformed and the federal budget must clearly reflect this. Although

they concern different aspects, the principles of the federal budget and

the corporate one are quite similar. Their similarity is described in this

section.

4. Similarities and Differences between the Federal Budget and the

Corporate One. As the title clearly states it, this section intends to make

a comparison between the two types of budgets, by emphasizing common or

distinct matters that characterize them.

5. Types of Budget. This section focuses on providing a description of

the most important types of federal and corporate budgets, in order to

easier understand the purpose of financial budgeting.

Introduction

The activity of planning a budget is considered by many, both

theoreticians and practitioners, as the central activity of financial

management, whether one refers to private companies' budget or to the state

budget. Even the budget planning for individuals, or households represents

an important factor for all parties concerned.

The importance of budget planning resides in the fact that the budget

is mainly a representation of future revenues and expenditures, based upon

which the government or the company in case can establish general strategic

directions. Companies' financial performance is then analyzed based on the

forecasted numbers presented in the budget.

Government Budget

Government budget and corporate budget present certain similarities,

but they are also very different where certain aspects are concerned. In

both cases, the budget reflects the forecasted expenses and revenues for a

given period of time, establishing strategic directions for saving and

spending.

One of the differences between the state budget and the corporate one

relies on the fact that government's revenues are gathered from taxes.

Government's expenses are consisted of consumption and expenditures.

Unlike the case of corporate budget that only has an economic

dimension, the government budget has an economic, political and technical

dimension. The corporate budget's economic dimension consists in the fact

that the budget in case is designed so that it sends the least financial

effort for the best economic purpose. But the government budget is not

necessarily oriented towards reduced consumption or increased savings.

The political dimension of the government budget consists in the fact

that the budget is under direct political pressure exerted by the parties

affected by the budget. These interested parties' intention is to obtain

all the possible benefits. The technical dimension is the most objective

one, given the fact that it focuses on the actual revenues and expenses

that comprise the budget.

Budget Development Process

Another difference between the corporate and the government budget is

represented by the different ways the two types of budget are designed. The

budgeting process is different in the two cases, but it is difficult to

establish which of the two processes is the most complicated.

In the case of the United States, the government budget is proposed by

the President to the U.S. Congress. The Congress is further to make

recommendations regarding the funding levels that refer to the following

fiscal year. After this step, the House and Senate Budget committees must

develop budget revolutions that are supposed to establish spending limits.

The proposed budget is further analyzed by the Congress. Also, the

Congress is entitled to establish certain appropriations bills. However,

the number of organizations involved in designing, analyzing and approving

the federal budget is much larger. The governmental agencies involved in

the budgeting process include: the Government Accountability Office, the

Congressional Budget Office, the Office of Management and Budget, and the

U.S. Treasury Department.

The issue of the decision makers regarding the federal budget is a

very sensitive one. Unlike the case of the corporate budget, decision

makers involved in the federal budget planning can suffer negative

repercussions in case such a situation can be probed (Thompson, 2009).

The corporate budget planning begins with reviewing past actions,

their impact, effectiveness and efficiency (CIVICUS, 2001). The next step

consists in reviewing the company's vision, mission, general strategy and

specific objectives. The budget must be aligned with these factors in order

to be suitable for the company's situation.

After completing this important phase, operational plans must be

prepared. One of the most important steps of the budget planning consists

in determining the required resources and estimating the costs.

Furthermore, the actual budget is designed. The budget variant is then

discussed, analyzed and decided upon.

After the best budget variant has been agreed upon by all the decision

makers, the budget is implemented, and its effects are monitored. In

addition to this, revenues and expenditures are adjusted in case the

situation requires this.

Budget Principles

The federal budget is based on a series of principles that differ from

those that the corporate budget is based on. The federal budget's

principles have been exposed by President Barack Obama. The first principle

discussed by the President refers to the country's dependence on foreign

oil. This situation is considered to be a dangerous one, it must be

reduced, and the U.S. must orient more and more towards renewable energy

sources, as the President recommends (Involved Voters, 2009).

The second principle refers to the country's educational system. The

President has expressed the need of making the educational system a more

competitive one. The future of the country relies on the present situation

of the educational system. This is the reason for which the educational

system must be improved, and this must be reflected by the federal budget.

Another principle that the federal budget must rely on refers to the

health care system. The health care system must be reformed by reducing

costs, ensuring quality, and allowing individuals to choose the preferred

doctors and hospitals. Medicare and Medicaid are responsible for consuming

a great percentage of the federal budget.

Another important principle states that budget deficit must be reduced

even more in the future. In addition to this, a matter of higher importance

than even the deficit is represented by the expenses structure. In other

words, the government spends important amounts of money of services that

may not be as useful as considered in the first place.

Instead of establishing a certain acceptable level that… READ MORE

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