Resource Allocation and Budgeting
Resource allocation and budgeting is an important aspect of any business or company. The budget has two major functions. The first is estimating the cost of objectives completion in the most realistic way possible in order to fund an identified project. Sponsoring agencies use budget details for purposes of determining whether proposals provided are realistic and feasible.
Secondly, a budget provides the most reliable means of monitoring the financial activities of the project throughout its life. In this manner it becomes possible to establish how close the actual progress towards attaining the objectives is in relation to the proposed budget. There are several approaches to resource allocation and budgeting. Some of these include the following:
- Review service plan-A management team is often asked to revisit the service plan and identify tough decisions that need to be made. There are also new projects that might be scaled or shelved down.
- Review existing services and programmes-The management team can also be asked to consider ways of altering particular services and some options might need to be outsourced.
- Resource allocation and budgeting can be carried out in accordance to priorities. This is especially true if the budget allocated ends up been less than the estimated amount. In such instances, there are two things that take place. The first is protecting priorities and the second one is incremental reduction of the budget.
Usually, resource allocation and budgeting is done in a period of 12 months. When a budget is been developed, revenues are often estimated first for purposes of determining the level of resources available in an upcoming budget year.
Based on the resources estimated, expenditure limits, estimated resources which are also known as budgetary allocations are then assigned to every budget category. When budgetary allocations are been developed, an organizations needs are taken into consideration in order to determine the areas of importance that require the money available.
Usually, the resource allocation and budgeting will be divided into program units and departments. This makes easy identification of resources allocated to specific functions and programs. All the categories are made with several budget allocations that are known as line items for specific needs required for the department operation.
However, there are instances when resource allocation and budgeting is not sufficient. This will occur when there is no adequate funding for reoccurring or predictable expenses which are not included in the allocation.
Resource allocation and budgeting should be monitored routinely in order to ensure the budgeted amounts are enough to meet the expenditures. It is also crucial to have a tracking system for all purchase bills and orders.
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