BUDGET PROCESS Meaning and
Definition
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The budget process refers to the sequential series of activities and procedures undertaken by individuals, organizations, and governments to plan, revise, allocate, and control financial resources within a specified time frame. It involves the formulation and implementation of a comprehensive financial plan that outlines the projected expenses and revenues for a given period.
The budget process generally begins with the identification of goals, objectives, and priorities based on the strategic plan or vision of the entity. It involves gathering and analyzing relevant data, such as historical financial information, market trends, and organizational needs, to establish a realistic budget. This includes estimating revenues from various sources and determining expenditure requirements across different departments or cost centers.
Once budgets are developed, they are typically reviewed and approved by relevant stakeholders such as management, shareholders, or government bodies. This stage also includes negotiations and discussions regarding resource allocation and financial constraints.
Following the approval, the budget is implemented, wherein the allocated resources are distributed according to the predetermined plan. This involves tracking expenses, monitoring variances, and adjusting allocations as necessary to ensure effective and efficient utilization of funds.
Periodic financial reports and reviews are crucial components of the budget process as they aid in assessing performance against goals and providing transparency to stakeholders. Feedback and assessment from these reports often inform future budgetary decisions and modifications.
Overall, the budget process is a structured framework that guides individuals and organizations in managing their financial resources, ensuring financial stability, and promoting strategic planning and accountability.
Etymology of BUDGET PROCESS
The word "budget" originated from the Middle English word "bowgette", which referred to a little bag or purse. It later evolved into the French word "bougette" with the same meaning. In the late 18th century, the word "budget" began to be used to describe a financial statement or plan, and it eventually became associated with government finances.
The word "process" derives from the Latin word "processus", which means a forward movement or progress. It entered the English language in the late 14th century.
Combining these two words, "budget process" refers to the systematic, step-by-step procedure for creating, reviewing, and implementing a budget.
