Miguel Cabezudo

Nicolas Laflesselle

BUDGETING

DEFINITION

•Financial plans are called budgets and the process of making, monitoring and adjusting them is called budgetary control.

•The budget may be expressed in tabular or graphical format such as S curves.

TYPES OF BUDGETS

Harris and McCaffer identification :

*Operating budget

*Annual sales budget

*Capital expenditure budget

*Cash flow budget

*Master budget

PREPARING A BUDGET

Prepare forecas

t

Consider policy

Assess resource

s

Review

Accept the

budget

Accept master budget

Consult management

Prepare forecastdata

Assess resourcesand impact on

forecastConvert to

monetary budget

PREPARINGTHE BUDGET

PREPARING A BUDGET

Prepare forecas

t

Comparitor period

Compare forecast/actua

l

Analyse and report

Action and

implement

Management Action

Quarterly,Monthly,

weekly or daily

Prepare forecast (sales,cumulative value and

cash flow)

CompareForecast with

Actualperformance

Analysis ofVarianceReport to

management

THE CONTROLCYCLE

CONTRACT BUDGETS

*It is an essential function of management to prepare forecast in order to establish a plan for the future of the business.

*The company has to plan for the next year’s

*Estimating, planning and quantity.

PRESENTATION OF A BUDGET

*Bar chartMoney or resource allocations against time

*Graphical displayValue-time curve forecast

LABOUR EXPENDITURE BUDGET

MAN WEEKS

PLANT BUDGETCUMULATIVE FORECAST MAN

WEEKS

00 1 2 3 4 5 6 7 8 9 1

011

12

13

14

Man weeks

Project duration (weeks)

10

20

30

40

50

60

Variance

PLANT EXPENDITURE BUDGET

PLANT BUDGETCUMULATIVE EXPENDITURE

FORECAST

00 1 2 3 4 5 6 7 8 9 1

011

12

13

14

Expenditure (£000)

Project duration (weeks)

1

2

3

4

5

6

7

8

9

10

11

12

Variance

PRELIMINARIES BUDGET

VARIANCE

00 4 8 12 16 2

0

Expenditure (£000)

Project duration (weeks)

10

20

30

40

50

19 400

25 700

32 500

39 800

47 400

22 000

14 000

5 400

3 700

0

BUDGET CONTROL PROCEDURE

*Must be established in order to monitor the budget at clearly defined time intervals. (daily, weekly, monthly, quarterly or annually)

*Management must act where variances are apparent at each review date, whether they are positive or negative.

REFERENCES

*Cooke, Brian, & Williams, Peter. Construction, planning, programming & control. Blackwell Publishing