An organization should budget to:
- Align and invest it's resources in positive performance
areas of the organization
- Acutely determine the needs of its target market and
seek to meet them
- And, to formulate a tool for evaluation and
communication of performance
Clarke, et., al, (2018)
Most if not all organizations have
budgets intensely prepared following a financial year end, but few align to the
above strategic budgeting objective by Clarke, et., al, (2018).
Aligning budgets to performance
The traditional way of budgeting
focuses on line item budgeting such as staff costs for cost budgeting. The
reformed budgeting model focuses on allocating business resources to areas
affecting organization performance positively. Shah (2018). Programs budgeting
is one approach of efficient budgeting model that allows organizations to base
their budget on forecast performance program.
Budgets are a critical tool that
organizations use to tie their expected results to their performance. Duncan
et, al., (2018). This is critical in ensuring the quality of service or product
delivery is guaranteed during the process so that the output meets the
expectation of the market.
Determining target market needs in
budgeting
Client needs are influenced by the
client numbers in an organization and by the client deficiencies an
organization needs to address. Goeminne and George (2019). In setting budgets,
these needs and should be reflected in the budget for an organization to grow
its performance.
Customers are driven by value they
derive from an organization's product or service. Organizations need to
understand these needs for them to align to the market when making their
budgets. Timoshenko and Hauser(2019)
Budgets as communication and
measuring tool
Organizations use budgets to break
down company objectives and communicate expectations on their employees. They
then make plans necessarily to achieve these objectives. (Shim et, al., 2011)
The progress of the laid out plans
is measured against set budgets and corrective measures necessary for
successful performance factored in on a timely and relevant basis. Measuring
progress at the end of the year would be to show the the general performance
that had been measured consistently throughout the year. (Shim et, al.,
2011)
Reference
Clark, C., Menifield, C.E. and
Stewart, L.M., (2018). Policy Diffusion and Performance-based Budgeting. International
Journal of Public Administration, 41(7), pp.528-534.
Duncan, G.M., Mugabe, K., Zimmerman,
K.A., Sibaja, V. and Luis, M., (2018). Adapting a Culture for Performance
Management at the Nevada Department of Transportation (No. P365-16-803).
Nevada. Dept. of Transportation.
Goeminne, S. and George, B., (2019).
New development: Determinants of financial performance in public
organizations. Public Money & Management, 39(1), pp.70-73.
Shah, A., (2018). Unit-5 A Primer On
Performance Budgeting. IGNOU.
Shim, J.K., Siegel, J.G. and Shim,
A.I., (2011). Budgeting basics and beyond (Vol. 574). John Wiley & Sons.
Timoshenko, A. and Hauser, J.R.,
(2019). Identifying customer needs from user-generated content. Marketing
Science, 38(1), pp.1-20.
