Budget As Tool For Allocating Resources
James Achanyi-Fontem
A London accounting expert, Mrs. Ngechop Yvonne Claire Ndifor, has described a budget as tool for allocating resources. She was presenting a lecture on budgeting for growth and book keeping to managers of Fine Forest Foundation Cameroon at the Sickle Cell Society on the 20th November 2008 within the frame work of a Commonwealth Professional Fellowship Grant.
In her lecture, Mrs. Ngechop Yvonne elaborated on the objective of a budget, the reason why a budget should aim at the growth of an organization and why book keeping is necessary for evaluation. She explained that a budget should be able to depict what the organization expects to spend and earn over a period of time.
She added that a budget could reflect the financial representation of an organization’s mission and also strategic goals. It is a tool for allocating resources and implementing strategic plans and serves as an indicator for evaluating performance, she observed. 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 highlight 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 unknown expenses.
Emphasizing on the benefits of budgeting to an organization, she revealed that through budgeting the organization can exhibit what is going on. A budget is to help in control of activities after facilitating the execution of the organization’s plan of action. Budgets also lead to fluid communication amongst stakeholders and staff. Often, managers take advantage of opportunities to gain extra time in service delivery and save money.
There are five typical steps in elaborating a budget which include:
 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 there is.
 There are also three types of budgets:
 Production budget,
 Sales budget and
 Project budget.
 In the case of voluntary and charitable organizations, activities are budgeted separately and it is with the diiferent budgets that a combined budget of the organization emerges. Mrs. Ngechop concluded that in administrating finances, the budget is different from cash flow. When addressing cash flow, we talk about the actual expenditure and income.