Page 6 - Budgeting

Building the Budget

 Building the budget:

 Step 1 : Construct budgets in operational terms (Lowest levels of the

organization).

 Step 2: Develop a financial plan based on the operational plan from

Step 1.

 Budgets should be used for financial planning (decision making),

but not for performance evaluation (control).

 Units should be judged by comparing their actual performance with the
actual performance of defined “peer units”.

 Rewards can include consideration of both financial and non-financial

performance measures.